The Battle for Collective Redress

The European Parliament and Council are currently debating the fate of a directive proposal which would permit victims of corporate harm to bring a collective challenge to the courts – a form of European class action.

The mechanism proposed by the Commission allows a qualified entity to bring a representative action against a trader who has violated specific pieces of EU legislation listed in an annex causing harm to the interest of consumers. This model differs significantly from the Anglo-Saxon class action model, which allows a lawyer to represent members of an identifiable class directly. In EU law, this mechanism already exists under the Injunction Directive (which will be replaced by the current proposal). France, Belgium, Italy and the Netherlands already apply a similar system to compensation claims. The advantage of having these representative entities and the reference to “harm to the interest of consumers” is that it facilitates obtaining injunctions and redress orders without the cumbersome step of previously identifying individually damaged consumers.

The proposal reflects the Commission’s concern that the collective redress mechanism would be used by law firms in order to bring cases for their own financial gain rather than out of concerns for consumers. Representative organizations must, therefore, be a non-profit organization that works in the pursuance of a legitimate interest. They must also disclose the sources of all funds used for their activities and to bring the action. Based on a study requested by the Parliament these mechanisms are entirely sufficient to prevent any form of abuse.

The pitfall of the proposal lies rather in the decision to limit its applicability to violations of certain directives and regulations listed in an exhaustive annex. While the violation of an act of EU law is arguably a necessary element to bring the proposal within EU competences, drawing up an exhaustive list of EU law that, if violated by a trader, can harm consumers is a monumental task. While the proposal covers 59 such acts, research by ClientEarth suggests that a great number of legislation has been omitted in the environmental field alone. For example, the Commission has not included the Chemical Regulation REACH, even though currently at least 1/3 of marketed chemicals do not comply with this regulation, resulting in serious harm to the interest of consumers.

These discussions also reflect a broader underlying issue: since it only applies to consumer harm, the directive proposal breaks with the EU’s previous horizontal approach to collective redress as reflected in the previous 2013 Recommendation. A 2018 Report on the Recommendation concluded that uptake had been low, in particular in the environmental field. This is particularly problematic given that many of the most destructive cases of mass harm arise from breaches of EU environmental law. These would include cases where unauthorized pesticides are released into the environment or where a plant violates EU industrial emissions laws polluting the air with toxic ash and rivers with mercury.

The Collective Redress Proposal stands currently at a political crossroads: in light of the upcoming European elections, the time schedule is tight; the European Parliament Committees and the Council need to agree on their positions by the end of the year to allow for sufficient time to adopt the directive before May. In the face of intense industry pressure and ideologically opposed MEPs, a central challenge will be to keep the proposal intact while moving quickly to meet the timeline.

At the same time, there needs to be sufficient room for discussion to ensure that the scope of the directive is, in fact, adequate, in order to prevent that a few years down the line Europeans are denied a collective remedy because their specific “type” of harm was not included in an annex.

Collective redress is an effective and cost-efficient way to protect the rights of EU citizens, in particular by preventing an absurd scenario where every individual has to file and build their own case. Moreover, the proposed directive would constitute an excellent additional mechanism to improve enforcement of EU law – failure of which costs the EU 50 billion Euros in the environmental field alone.

Last but not least, it would also constitute the only act at European level to partially implement the obligation of Article 9(3) of the Aarhus Convention to provide access to justice in case of acts/omissions of private actors contravening national law related to the environment.

Many good arguments – let us hope they prevail!

 

 

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Rob Bye