The impact of new EU mass actions directive across Europe

Information for England & Wales last updated in November 2022.

The current mass actions landscape

England and Wales does not currently have an overarching mass actions regime. Instead, there are a range of different options which are open to parties and courts for bringing and managing mass actions. These operate principally on an opt-in basis, although there is a specific opt-out regime in the Competition Appeal Tribunal (CAT) for collective proceedings in respect of infringements of competition law. Outside competition law, the main procedures used by claimants are:

• multiple claimants bringing a joint action under the Civil Procedure Rules (CPR), where their claims can be “conveniently disposed of in the same proceedings”;
• "representative actions" under the CPR, where one claimant may bring a claim as representative of other claimants with the "same interest" – though case law now makes clear that this procedure is available only in very narrow circumstances;
• the court case-managing multiple claims together; and
• the court making a Group Litigation Order (GLO), which starts a formal procedure for the cohesive management of multiple claims involving common or related issues of fact or law.

Collective redress schemes are increasingly popular. These are schemes put in place when businesses decide, or are required by regulators, courts or statute, to adopt an alternative to litigation in order to right wrongs committed against a particular class of customers or other individuals quickly and economically.

Mass actions are particularly common in relation to competition law, data privacy, financial services, shareholder, environmental, personal injury and product liability claims. Redress schemes have been used particularly, though not exclusively, by the financial services sector and for mass personal injury and product liability claims.

There has been a dramatic increase over recent years in the number of mass actions under the specific opt-out regime in the CAT for competition claims. However, England and Wales has not otherwise traditionally been regarded as a particularly easy jurisdiction in which to bring mass actions, principally because of the lack of a generally-applicable opt-out procedure for non-competition claims.

Nevertheless, there has – at least in some quarters – been an increased focus on making effective mass actions procedures available to claimants. This, coupled with the growth of third-party litigation funding to finance such actions and specific developments for example in the competition sphere, mean that we have recently seen, and are likely to continue to see, a growing number of mass actions.

The impact of the RAD

Given the UK's departure from the EU, the UK will not be required to implement the RAD. However, the UK has often indicated a wish to align with the EU on consumer matters, as well as to retain its appeal as a “jurisdiction of choice” for international disputes. As a result, it remains to be seen whether any reforms will follow on a voluntary basis.

In fact, the existing mass actions procedures available in England and Wales share a number of features mandated under the RAD. These include procedures for early dismissal of weak claims; an extensive regime for disclosure of documents; a wide range of available remedies; and a general adherence to the “loser pays” rule on costs. The main impact of not being required to implement the RAD is that England and Wales, unlike EU member states, will not be required to have a generally applicable procedure whereby consumer mass actions can be pursued by “qualified entities”, without costs risk to individual claimants.

However, some of the English mechanisms do allow claims to be brought by representatives. In particular, collective proceedings for competition law breaches in the CAT involve a class representative, who may be either an individual or a consumer or trade body. For example, in the landmark Merricks v Mastercard litigation, concerning alleged excessive 'interchange fees' charged to merchants on the use of Mastercard debit and credit cards, a proposed class of millions of customers is represented by Walter Merricks, former Chief Ombudsman of the Financial Ombudsman Service.

Additionally, in relation to data protection, individuals can request relevant not-for-profit organisations to make complaints to the Information Commissioner's Office (ICO) about a data controller or processor and to bring court proceedings on the individuals' behalf. The government recently consulted on whether not-for-profit organisations should be enabled to take similar action without the express mandate or even knowledge of individual data subjects, but - for now at least - has concluded that the legislation should not be amended to permit this.

Pitfalls regarding mass actions

While there is no overarching opt-out class action regime, so that historically England and Wales has not been particularly fertile ground for mass actions other than in relation to competition claims, mass actions are growing, enabled by a range of available procedures, the availability of third party litigation funding, and a developed claimant legal industry with a strong appetite for “book building” mass claims. The relative informality of some of the procedures for bringing mass actions can also lead to defendants facing multiple different claims, whereas more formal, streamlined procedures at least mean that all or most relevant actions are consolidated.

For queries related to England and Wales, contact David Barker and Alan Davis of Pinsent Masons.

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Information for Scotland last updated in November 2022.

The current mass actions landscape

Until recently, there had been no provision in the court rules in Scotland for any form of group or representative action. The courts have historically used practical measures, typically the use of a ‘lead’ action, to manage groups. This has met with different degrees of success.

However, since August 2020 there has been a new group proceedings procedure which allows for the formulation of a group and for an action to be progressed by a representative party. This is currently an opt-in regime, whereby parties consent to become part of the group and are then bound by court determinations in the proceedings. The court must give permission for matters to be raised as group proceedings, which it may do where satisfied that the claims raise the same, similar or related issues of fact or law, and that the representative party is a suitable one and has made all reasonable efforts to identify and notify all potential group members about the proceedings.

In addition, Scotland is subject to the UK opt-out class action regime for competition law infringements discussed in relation to England and Wales above, and, in the data protection field, individuals can request not-for-profit organisations to make complaints to the ICO about a data controller or processor and bring court proceedings on their behalf. Third party funding of litigation, including mass actions, is permissible in Scotland and is a growing industry.

Groups of claims which have been before the courts in Scotland in recent years have included claims for competition follow-on damages and product liability claims relating to medical devices. There are also significant numbers of similar financial services claims before the courts but they are not managed by the courts as a group and instead are spread across a number of the Sheriff courts, similar to the County Court in England and Wales, which brings its own challenges and opportunities as regards the efficient and strategic management of those claims. Matters being dealt with under the new group proceedings procedure so far include vehicle emissions claims and personal injury claims against a Scottish tea producer by Kenyan tea plantation workers.

The impact of the RAD

Given the UK's departure from the EU, the current position is that Scotland is not required to implement the RAD. However, as discussed earlier, group proceedings have been introduced to attempt to remedy the previous gap in the court's procedures for large groups of claims.

There are some similarities but also significant differences between the Scottish regime and the regime required of EU member states under the RAD. For example, while Scottish courts will generally apply the “loser pays” rule on costs – subject to the recent introduction of qualified one-way costs shifting in personal injury actions, so that genuine losing claimants in such actions should not generally have to pay the defendant's costs – there is no quick or easy exit from litigation where a weak claim is pursued.

Scotland also has more restricted rules on disclosure than some other jurisdictions, including England and Wales. The RAD requirement that proceedings be brought by a “qualified entity” is also a key point of difference: under the new group proceedings procedure, the representative may, but does not have to, be a trade or consumer organisation.

Pitfalls regarding mass actions

The newness of the group proceedings procedure means that there is little case law or judicial experience of the procedure. As a result, novel issues and difficulties may arise.

It should also be noted that Scotland is “opt-out ready” in terms of group proceedings. Although the new group proceedings procedure is currently an opt-in system, the Scottish parliament did, in the legislation which introduced it, legislate to allow Rules of Court to be introduced for group proceedings on either an opt-in or opt-out basis. This sets Scotland apart from the other UK jurisdictions, England & Wales and Northern Ireland, neither of which currently has a statutory basis for opt-out proceedings beyond the competition space.

Whether Rules of Court should be introduced to allow opt-out, as well as opt-in, group proceedings is controversial. However, if Scotland does introduce opt-out proceedings, this will no doubt be closely watched by those responsible for the procedural rules applicable to mass actions in the other UK jurisdictions, particularly given many businesses have operations across the UK.

For queries related to Scotland, contact Jacqueline Harris and Joanne Gillies of Pinsent Masons.

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Information for Northern Ireland last updated in November 2022.

The current mass actions landscape

There are various mechanisms available to bring mass actions in Northern Ireland. Under the Rules of the Court of Judicature Northern Ireland, these include:

• "representative actions" brought by one party as representative of all parties with the same interest in a claim;
• procedural rules for joining together, into one claim, multiple claims brought by one plaintiff, or multiple plaintiffs' claims where for example they raise common questions of law or fact and arise out of the same transaction(s); and
• the court's powers to consolidate, hear together or hear consecutively any actions brought in the same division of the court which give rise to the same or similar questions of fact or law.

Northern Ireland does not currently have a specific, generally applicable procedure for group litigation like the English Group Litigation Order (GLO) or new Scottish group proceedings regimes. As in the rest of the UK, the competition class action regime is also available, as is the ability for data subjects to request not-for-profit organisations to make complaints to the ICO and bring court proceedings on the individuals' behalf. Redress schemes may also be used.

When mass actions are brought, the subject matter is varied. Claims in relation to data breaches are becoming more frequent. There have been planning challenges by housing associations. In 2018 a mass action was brought by a group representing more than 3,700 police officers and civilian staff regarding circa £40million in disputed holiday pay. There has previously been a mass action for post-traumatic stress by members of the Royal Ulster Constabulary (RUC) following their time working in the RUC during the Troubles in Northern Ireland. Historical institutional abuse is a recent issue being dealt with under a redress scheme, the Northern Ireland Redress Board.

However, overall, mass actions are not widely brought in Northern Ireland. Funding issues may play a role. In general, representative actions are funded in the same way as other litigation, with the parties represented by the plaintiff usually agreeing a percentage contribution to the costs. 'No win, no fee' contingency fee arrangements are not permissible in Northern Ireland; third party litigation funding is probably permissible but in practice not widely used; and while after-the-event insurance (ATE) to cover liability for a defendant's legal fees is available, it is again encountered relatively infrequently, perhaps because the premiums are large and not recoverable from the other side.

The impact of the RAD

Given the UK's departure from the EU, the current position is that Northern Ireland is not required to implement the RAD.  However, the RAD may create a wave of interest and therefore increase the uptake of mass actions in Northern Ireland: while there is already provision for such actions under the current court rules, there may be a lack of familiarity with this at present.

The existing mass actions procedures available in Northern Ireland share a number, albeit not all, of the features required of collective redress under the Directive. These include procedures for the “strike out” of weak claims; detailed rules in the Commercial Hub on discovery of documents; a range of available remedies; and application of the “loser pays” rule on costs. The RAD concept of “qualified entities” is, however, a significant difference.

Pitfalls regarding mass actions

Whilst mass actions are not readily brought in Northern Ireland, there is a recent upward trajectory of these types of cases. Northern Ireland’s unique relationship with the Republic of Ireland is also a consideration. Many businesses have operations either side of the border who may benefit from the experience and knowledge of the RAD’s implementation in the Republic of Ireland. Similarly, implementation of the RAD in the Republic of Ireland may cultivate interest and action in Northern Ireland to explore the opportunities currently available here for mass actions.

For queries related to Northern Ireland, contact Laura Gillespie of Pinsent Masons.

Information for Republic of Ireland last updated 10 January 2023.

The current mass actions landscape

While there is currently no overarching mass action procedure in Ireland, there are a number of different mechanisms available for parties to bring mass actions. The most popular is the use of "test cases", where multiple plaintiffs pursue similar claims against a single defendant or group of defendants. This allows for one or a small number of claims to be heard while others are stayed pending the determination of the test case(s). The parties to the remaining claims then consider the outcome of the test case(s) in order to determine how to proceed with their claim.

There are also a number of other mechanisms available to parties. For example, the court has an inherent jurisdiction to direct that cases be heard simultaneously. It is also possible for parties to apply to the High Court to seek that pending cases be consolidated.

Another mechanism is the use of the "representative action" procedure under the court rules, whereby if numerous persons have the same interest in a cause or matter, one or more of them may sue on behalf of or for the benefit of all interested persons. The court must be satisfied that each member of the class has authorised the representative. The decision of the court will generally bind every interested party. However, there are a number of limitations to representative actions which make them less popular than the use of test cases. For example, the remedies available are limited to injunctive and declaratory relief. In addition, very strict requirements have been read into the nature of the necessary link between the parties. Legal aid is also not available.

Separately, not-for-profit bodies may lodge complaints with a data protection authority on behalf of a group of data subjects, if they have the data subjects' permission to do so. The test case mechanism is often used in financial services, insurance, competition law, product liability and medical negligence disputes. Recent examples include claims by publicans relating to business interruption insurance and Covid-19, financial product mis‑selling claims against Irish banks, and damages claims brought by Irish hauliers alleging anti-competitive price fixing by European truck manufacturers.

There have been a number of recommendations in recent years from third party groups and the courts that a formal mass action procedure and third-party funding be introduced into Irish law. As matters stand, third party funding of litigation is not permissible in Ireland unless the third party has a legitimate interest in the proceedings. Coupled with the requirement to implement the RAD, there is likely therefore to be significant change in this area in the coming years, providing more scope for future mass actions.

The impact of the RAD

Legislation is required in order to transpose the RAD into Irish law, and the existing procedural regime for mass actions will need to be supplemented to achieve compliance with its terms. Accordingly, last year the Department of Enterprise, Trade and Employment published a draft Bill, the General Scheme of Representative Actions for the Protection of the Collective Interests of Consumers Bill (the Bill), setting out a proposed procedure for consumer mass actions to comply with the RAD.

The Bill is still at a preliminary stage and will need to be debated by both the Dáil and the Seanad – the Irish houses of parliament known as the Oireachtas. Its provisions may therefore develop in the coming months, and new court rules are also likely to be published to address procedural issues relevant to the operation of representative actions in practice. The Bill was not transposed into Irish law in accordance with the 25 December 2022 deadline. However, the Joint Committee on Enterprise, Trade and Employment ('the committee') published its report on the pre-legislative scrutiny of the Bill in December 2022, making a number of recommendations for amendments to the draft with a view to making it as fair and impactful as possible.

There are already some similarities between the existing Irish regime and the requirements of the RAD, such as: a general “loser pays” rule on costs; the possibility to “strike out” proceedings at an early stage for rule breaches or to hold an early trial of a preliminary issue, such as a limitation issue, which may dispose of the case; rules on the discovery of documents; and a range of available remedies where the test case procedure is used, although as noted above in representative actions only injunctive or declaratory relief may be sought.

However, amongst other steps, “qualified entities” who may bring consumer mass actions in accordance with the RAD will need to be designated. The Bill envisages that, in Ireland, qualified entities will need to satisfy the stricter criteria set out in the RAD for qualified entities to bring cross-border representative actions, whether they are in fact bringing cross-border or domestic actions. This consistent approach is likely to make it more difficult for qualified entities to be established “ad hoc” for the purposes of bringing a particular representative action in Ireland.

It is not clear yet which entities might be designated as “qualified entities”. This is likely to depend on the nature of the dispute. The committee has recommended that a detailed application, criteria and designation process be prescribed for in legislation when it comes to appointed qualified entities. As the Directive covers a number of policy areas, a number of different bodies might play a role, including for example the Financial Services and Pensions Ombudsman, the Central Bank of Ireland, the Data Protection Commission, the Commission for Communications Regulation and the Competition and Consumer Protection Commission.

An interesting feature of the Bill is that it introduces the ability for qualified entities to seek injunctive relief on behalf of consumers on an opt-out basis. Collective claims for redress measures such as damages must continue to be brought on an opt-in basis. The committee supported this position in its recommendations.

In the interests of fairness and access, the committee has recommended that the scope of qualified entities be widened to provide for consumer claims from sole traders, SMEs and other businesses. The committee further recommended that the entry fee chargeable by such qualified entities must be modest, so as not to prohibit access to redress for certain consumers.

The Bill does not interfere with Ireland’s current stance that third party funding of litigation is not permitted. However, we may see change in this area in future as it does leave open the door for third party funding “insofar as permitted under Irish law”. It has recently been announced that third party funding of arbitration will be permitted in Ireland. In addition, the Government published the Implementation Plan on Civil Justice Efficiencies and Reform Measures in May 2022 (the Implementation Plan), which addresses how the Government intends to implement the reforms proposed by the Report of the Review of the Administration of Civil Justice published in October 2020.

The Implementation Plan addresses, amongst other things, third party funding and includes a timeline for the implementation of legislation for third party funding in litigation for liquidators, receivers, administrators and official assignees or trustees in bankruptcy in H1 2024. It also provides for a wider policy review to be undertaken on third party funding of litigation costs more generally in H1 2024, following the publication of a detailed examination on the issue which is being currently undertaken by the Law Reform Commission. As such, this is an area to watch in Ireland.

Wider change is also expected. Even prior to the Bill, recommendations had already been made for a mass actions procedure that would sit alongside the test case procedure. The Implementation Plan also includes legislation for a comprehensive Multi-Party Action (MPA) procedure in Ireland, with a draft bill to be published in H1 2023, and legislation to be enacted in H1 2024. In the context of MPAs, the Implementation Plan refers to legislation for a multi-party action along the lines of the UK’s group litigation orders as well as a separate single representative action procedure encompassing multiple claims. The committee echoed this call for change and recommended that engagement occur with the Minister for Justice and Department of Justice to analyse and reform the matter of third-party litigation funding legislation in Ireland, with a view to reviewing and reforming the laws on champerty and maintenance.

Accordingly, it is likely that we will see an increase in the number of mass actions in Ireland in light of the new procedure the Bill will introduce as well as the introduction on a comprehensive MPA procedure in 2024, with potential further reforms on other areas such as litigation funding. In the interests of transparency and effective monitoring of this increase, the committee has recommended that a national electronic database be established to track representative actions.  

Pitfalls regarding mass actions

Businesses should be aware that there will be significant change in this area of law in the coming months and years which will provide more scope for future mass actions, as well as for novel issues to arise in those actions. Additionally, interest in Ireland as a dispute resolution forum has increased in light of Brexit, and for similar reasons Ireland may be seen as an attractive venue for bringing mass actions once the Bill’s new procedures are introduced.

For queries related to the Republic of Ireland, contact Ann Henry and Zara West of Pinsent Masons.

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Information for France last updated in April 2023.

The current mass actions landscape

There are currently two main types of mass actions in France:

• actions under a 2014 law, open to consumer associations, in respect of consumer and competition law breaches (consumer law mass actions);
• actions under a wider 2016 law, in relation to environmental liability, discrimination, data protection and health product liability.

The consumer law mass actions regime enables a group of consumers to obtain compensation for material damage to property suffered as a result of a breach of obligations by the same defendant or defendants. This regime is exclusively open to 15 approved consumer associations. In general, the court will determine the liability of the defendant or defendants, based on the facts and evidence of the individuals presented by the association, and will then define the wider class of persons affected and how they are to be informed about the case so that they can join it.

Class members can then opt into the group, on a voluntary basis. Unsuccessful defendants must make individual compensation for the damage suffered by each consumer who has opted in, made regular representations within the time limits set by the judgment on liability, and provided all the evidence required by the judgment. A mediation process may be used, and parties may also choose to use alternative measures, such as settlement or arbitration, organised by the consumer association.

The wider procedural framework set up by the law of 2016 also enables a group of people to obtain compensation for material damage suffered as a result of a breach of obligations by the same person or persons. Again, these claims must be brought by associations, with the appropriate association depending on the nature of the case. Indeed, this regime involves a number of variations depending on the area of law to which a claim relates, including the type of relief available: for instance, for health and environmental actions, compensation for bodily injury is provided for, while for data protection actions moral damages or material loss can be recovered. Under this regime, like under the consumer law mass actions regime, a mediation process can again be organised.

The French Data Protection Act, which implements the General Data Protection Regulation (GDPR) into French law, also allows not-for-profit organisations to pursue actions on behalf of multiple data subjects to ask for the cessation of a breach of the GDPR and/or damages. In recent times, mass actions in France have focused on electronic communications, life insurance, bank loans, the motor trade, housing and data protection. Actions have also been brought against pharmaceutical companies concerning medicines or contraceptives.

However, mass actions have not been prevalent in France. This is due to factors including: the small number of approved associations which can take actions under the consumer law mass actions regime; low uptake and success rates in these claims; low compensation even in successful claims; and lengthy procedures. Only twenty-four mass actions have been launched and most of them are still pending and are related to consumer claims.

Only two actions have had a positive outcome for consumers, thanks to proceedings being settled, and most of the actions brought before judges have resulted in a negative outcome for associations. Moreover, in the Foncia v. UFC case of 2018 relating to housing issues, the court dismissed the association's claim on the grounds that the rental relationship did not fall within the scope of class actions; the material scope of these actions has therefore been reduced by judges.

The impact of the RAD

The RAD contains proposals that are different from the current provisions of French law. For example, it extends the scope of consumer mass actions to a wider variety of policy areas, including for example defective products, and demands that wider redress remedies are made available than current French law, which restricts such remedies to compensation for material damage and, in the case of the consumer law mass actions regime, requires damage to property.

The RAD will be transposed into French law very soon. A bill of law has been submitted to the French parliament aimed at transposition. The current draft of this bill is aimed at increasing mass actions in France. It establishes a single procedural framework for mass actions. As a consequence, the distinction between the consumer law mass actions regime and the wider procedural framework set up by the law of 2016 is meant to disappear.

The requirement to give formal notice before filing a claim, which was mandatory for some mass action claims related to environmental, discrimination and data protection issues, is to be removed. This will reduce the length of these proceedings by 4-6 months.

Some judicial courts will have exclusive jurisdiction over mass action claims.

To promote mass actions, the bill makes the criteria for associations to file a claim more lenient. The specialised courts will be able to make the state, instead of the claimants, bear the costs of the action. Claimants will be able to request indemnification or the ending of a breach by the respondent. The bill of law also provides for a penalty, to the benefit of the minister of economy, when a breach by the respondent is committed purposely, for financial gain, and damages multiple people in a similar situation. This penalty can go up to 3% of the annual turnover of a company that is a respondent.

Some certified associations will be allowed to file cross-border actions, subject to transparency and independency obligations.

Finally, the bill of law promotes publicity of the court decision ruling on the liability of the respondent, as well as of any settlement approved by the court. The list of certified associations entitled to file a cross-border action will also be published, as will a list of mass actions pending in France.

The bill of law is subject to possible future amendments until it is passed and its final version comes into force.

Pitfalls regarding mass actions

Currently, the French mass actions landscape is favourable to international businesses. If the RAD leads to a more permissive reform of French law on mass actions, international businesses will have to prepare themselves to see more actions brought against them.

For queries related to France, contact Melina Wolman and Matthieu Querry of Pinsent Masons.

Information for Germany last updated 5 April 2023.

The current mass actions landscape

Whilst there are no US-style class action proceedings in Germany, there are three main mechanisms for the pursuit of claims by numerous claimants.

The first is Association or Interest Group Complaints (Verbandsklagen) brought by associations and groups acting in the interest of a group of affected individuals or entities.  There are currently three prominent examples of these types of complaints or claims. First, the 2002 Injunctions Act (UKlaG), provides for consumer associations, across sectors, to require the removal of offending contract terms, in particular in areas such as consumer credit arrangements and part-time workers' contracts, and to seek an order prohibiting the use of infringing practices.

Second, the Unfair Competition Act (UWG), which enables consumer associations to bring claims to restrain improper conduct in the context of business competition. Third, the Act against Restraint of Competition (GWB), which authorises specified interest groups, who promote commercial or independent professional interests, to file a complaint against breaches of competition law and market abuse.

The second main mass actions mechanism is Model Case Litigation (Musterklageverfahren). This is designed to bundle identical or similar cases into a streamlined process to ensure that they can be decided swiftly and coherently, without creating a "class action"; individual claims remain separate. A prominent example of model case litigation in Germany is litigation under the Act on Master Proceedings in Disputes Relating to Capital Markets Law (KapMuG).

The KapMuG is available for securities litigation and certain mis-selling claims, for example against brokers. Under KapMuG, parties request the trial of a lead case where the resulting model decision may be significant for other cases of which there must be at least nine. The model ruling is generally binding on all parties who have become part of the model action or registered their interest.

In addition to the KapMuG, in 2018 the German legislator introduced the Declaratory Model Action (DMA). Claims under this new law can only be brought by qualified consumer associations who meet certain criteria. Once a DMA claim has been launched, it will be published in a claims register where claimants can register their cases electronically; a DMA requires at least 50 registrations to proceed. Once a DMA has been started, additional DMAs regarding the same facts will be inadmissible.

The bundling of claims is also possible based on general rules of the German Code on Civil Procedure. These rules permit multiple parties to sue jointly in certain circumstances involving similar claims and allow the court to join together different actions which are legally connected or could have been asserted in a single claim.

Finally, law firms and funders make use of so-called assignment models where hundreds or thousands of claims are assigned to a SPV which then pursues the claims in one single proceeding. The lower courts initially were reluctant to accept this tactic and repeatedly held that the assignments were null and void, among others based on conflicts of interests on the part of the assignee. Yet, recent judgments by the German Federal Court of Justice confirmed the validity of the assignments and strengthened the position of the SPVs.

In recent years a large share of mass actions has been brought in cartel damages litigation, securities, banking and insurance litigation, product liability, the transport sector and the energy sector. All the procedural options identified above are limited in some way, and so mass actions are not generally seen as particularly promising in Germany. The number of KapMuG cases to date is low, and proceedings take extraordinarily long. The restrictions on bringing a DMA and the fact that it only gives rise to a declaratory judgment limit its impact.

The absence of a single streamlined process has also led to a significant mass claims industry, with law firms, legal tech providers, claims management companies and third-party funders often teaming up in attempts to enforce consumer rights in an efficient manner or to force a settlement on the defendants.

The impact of the RAD

On 29 March 2023, the German government formally published a draft Bill for the transposition of the RAD. The deadline to transpose the RAD originally expired almost four months earlier on 25 December 2022, but transposition was delayed due to a disagreement between the German Ministry of Justice and the Ministry of Consumer Protection. Therefore, at the end of January 2023, the European Commission had announced that it would send a letter of formal notice to Germany and many other member states which failed to meet the deadline.

The Commission requested the member states to complete transposition by the end of March. If this deadline is not met, the Commission could initiate the next step of the procedure. It remains to be seen whether the Commission will continue to take action against Germany in light of the published draft Bill.

With the published draft Bill, the German government aims to create a “balanced and fair legal framework for all parties involved”.

Scope

With the draft Bill, the legislator is introducing a new legal instrument called the “redress action” (Abhilfeklage) by way of a new Consumer Rights Enforcement Act (CREA, Verbraucherrechtedurchsetzungsgesetz) into which the existing regulations on the DMA will also be integrated. Claimants will be able to choose whether to sue for a declaration via the DMA or for actual redress. The KapMuG and the other methods of bundling mass claims discussed above will remain available as additional options for claimants. As a result, the tech providers and law firms specialising in pursuing consumer interests are unlikely to end their activities once the new representative action is in place.

The new redress action under the CREA would be available not only to consumers – as required by the RAD – but also to small businesses with fewer than 50 employees and annual turnover of no more than €10 million. It would operate on an opt-in basis and cover not only the particular legislation listed in the RAD but any civil law disputes.

Similar to the position under the DMA, a qualified entity then requires at least 50 affected consumers, with sufficiently similar claims, for filing an action under the CREA. Competent court for actions under the CREA is the Higher Regional Court at the seat of the defendant.

Criteria for qualified entities

The criteria which associations need to fulfil in order to register as qualified entities were and are highly disputed in Germany. According to the draft Bill, a qualified entity shall (1) be registered as a qualified entity in a public list by the Ministry of Justice; and (2) not obtain more than 5% of their financial resources through contributions from companies.

The list of requirements has been reduced compared to the previous version of the draft Bill. Unsurprisingly, the Ministry of Consumer Protection criticised the earlier draft as too corporate-friendly, as was already the case when the DMA was introduced back in 2018. Presumably in response to this, the requirements were amended in the current government draft.

Examples of entities entitled to bring a DMA under the current regime include consumer protection agencies, tenant associations, associations for the protection of investors and environmental aid agencies.

Timing for claim registration

The earlier draft Bill stated that consumers who want to register for an action under the CREA would need to do so no later than on the day before the first court hearing. This as well was particularly challenged by the Ministry of Consumer Protection as well as numerous consumer associations who suggested a latter point in time. The draft Bill now stipulates that claims can be registered up to two months after the first oral hearing. This means that consumers can take into account the court's position during that hearing.

To avoid a situation in which consumers can even register to participate from a favourable settlement or judgment, the draft Bill foresees that a judgment may only be rendered and a settlement may only be reached after the two month registration deadline has expired.

Third-party Funding

Finally, the draft Bill also contains rules on third-party funding. It not only incorporates a general disclosure requirement as to whether a third-party funder is involved in the action, but also provides that an action is deemed inadmissible if a party providing third-party funding is either a competitor of the defendant or in any way dependent on the defendant or is expected to influence the action to the detriment of the registered consumers.

Course of Proceedings

The competent court must first establish that the consumer claims bundled by the action are similar. Similarity shall be tested by a template-like analysis of the claims by the competent court.

Once similarity has been established, the proceedings would then be divided into four steps:

1. basic redress judgment, rendered if the court considers the case admissible and the defendant liable on the merits (Abhilfegrundurteil);
2. court invites parties to submit a settlement proposal;
3. final redress judgment (Abhilfeendurteil), rendered if no settlement is reached. The court can estimate a collective total amount and assume that all claims are fully justified. On request, the court is free to increase the collective total amount if its first estimation turns out to not satisfy all claims. If payment to specifically-named consumers is sought, the court shall decide by regular judgment - thus accelerating the proceedings in these more clear-cut cases;
4. implementation phase (Umsetzungsverfahren), in which a court-appointed administrator handles the distribution of the collective amount to claimants they deem to be entitled. Any remaining balance is returned to the defendant.

As it was already the case under the DMA, the parties may conclude a settlement with effect for all the consumers registered in the register of collective actions (Verbandsklageregister). Such settlement would need to be approved by the court and would be published in the public register. Any registered consumer may, within a period of one month, request to withdraw from the settlement.

Pitfalls regarding mass actions

The landscape of mass actions and collective redress mechanisms in Germany has been rather corporate-friendly compared to other jurisdictions in Europe, given limitations as to who can bring these actions and the relief that can be obtained.

In turn, however, this has fuelled the claimant industry's activity. There is an increasing acceptance and use of third-party funding and intensified involvement of international players in German litigation. The pursuit of individual claims in high volumes poses a considerable challenge to businesses' defence logistics and strategy as it requires an enormous effort, and high costs, to coordinate ongoing proceedings and maintain a sound and consistent strategy whilst having to appropriately address individual peculiarities of cases.

Overall, the implementation of the RAD in Germany is likely to make it easier for consumers and small businesses to obtain a remedy from infringing businesses. The draft Bill is rather consumer friendly. However, there may also be benefits: both for the German courts, which in recent times have been groaning under the burden of mass proceedings brought by way of multiple claims; and for businesses facing claims, who may be able to resolve disputes in a more streamlined and potentially more cost efficient way.

For queries related to Germany, contact Johanna Weißbach and Christian Schmidt of Pinsent Masons.

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Information for Spain last updated in March 2023.

The current mass actions landscape

Mass actions in Spain are brought before the court either by Consumer and User Associations, on behalf of their associates or of an undetermined group of affected individuals, or by multiple individual claimants who share a common interest. The Spanish Law of Civil Procedure (LEC), Article 11, allows mass actions to be brought by Consumer and User Associations – incorporated organisations whose object is the protection of certain consumers/users. Where a group of individuals harmed is clearly defined, the action may be brought either by a Consumer and User Association or by the affected group itself.

Where the number of aggrieved consumers or users cannot be determined, the action must be brought by a Consumer and User Association. The latter situation is more common, so most mass actions are brought by Associations. Mass actions brought by Consumer and User Associations involving financial interests, which represent the majority of mass actions in Spain, must be related to the use of products or services of common, ordinary and generalized use or consumption.

The High Court has also extended the ability to bring mass actions to some other associations, such as the Spanish Association of Minority Shareholders of Listed Companies, allowing shareholder mass actions.  In relation to data protection, Article 80 of the RGPD (GDPR) recognises the possibility of action through associations created in accordance with the legislation of each Member State: in Spain, such associations must comply with the requirements of Article 11 LEC.

In April 2018, an official proposal was published to amend the LEC to facilitate mass actions brought by a wider range of groups. The Spanish legislator has also proposed allowing affected groups to represent their own interests even when the number of individuals affected is undetermined. However, at the moment, these amendments have not been implemented. There is currently no procedure by which individual consumers represented by an Association can opt out of being a represented party in the action initiated, and so avoid any judgment being binding on them.

However, Article 15.3 LEC provides a type of opt-in mechanism whereby, when proceedings involve damage to an undetermined number of people, the court will make an announcement so that all affected consumers have the opportunity of intervening. If they do not take this chance, they will not be able to do so subsequently, though they could still pursue their individual claim. An individual that did not take part in an action may, however, benefit from the enforcement of the decision at a later stage, if the judgment upholding the claim has not individually determined the consumers and users who shall be deemed as benefiting from the judgment or has determined that the decision shall have procedural effects beyond those who have been a party to the proceedings.

Where the individual consumers or users benefiting from the decision are not stated, parties interested in seeking enforcement of the judgment may ask the judge to decide whether it recognises the applicants as beneficiaries in accordance with the data, characteristics and requirements set out in the judgment.

The concept of mass actions is not traditionally very well established in Spain, and the Spanish mass actions regime is not particularly well developed. There is a feeling of insecurity on the part of the judicial system about protecting the rights of each individual represented by an Association. However, mass actions are progressively increasing. Efforts are being made, like in the April 2018 proposal mentioned above, to develop the mass actions regime, and courts are increasingly admitting appeals from Consumer and User Associations. From lawyers and litigants' perspective, there is a growing initiative to bring mass actions lawsuits. As part of this, specific platforms are being developed. For example, a Platform of People Affected by Covid-19 was created, with the intention of bringing mass actions in this regard. The possibility of exercising rights jointly through such platforms, acting as associations, has been recognised.

The impact of the RAD

In January 2023 the Spanish government passed a first draft bill for the transposition of the RAD (linked content in Spanish). This will not only implement the Directive but also includes comprehensive regulation of collective actions, either for injunctive relief or redress, with particularly significant changes for redress actions. Once enacted, it should therefore bring about significant change to the Spanish mass actions landscape.

Under the bill, there will be a group of common provisions for both injunctive and redress actions. The new procedural regime will involve entities entitled to bring injunctive and redress actions on behalf of consumers and users whose rights have been affected by an infringement.

Injunctive actions may seek the cessation of harmful behaviors to the interests of the consumers or users harmed, as well as the prohibition of such conduct in the future, whereas redress actions may seek compensation for damage caused to consumers or users harmed as a result of infringing conduct. Both actions may be brought together, although it is possible that the court may agree to suspend an action for damages pending the resolution of an injunctive action.

Key features of the draft bill include:

• The substantive scope of application of the new rules is broad, allowing for representative actions to be brought in respect of any type of infringement where the collective rights and interests of consumers and users have been affected.
• A new public register of collective actions will be created.This should help individual plaintiffs to choose between proceeding on their own or joining a collective action.
• A new opt-out system will be set up for redress actions, accompanied by the necessary regulation that enables the system to be successfully applied, in contrast to the previous system which did not have this support. The court may, however, allow an opt-in action if each represented claim is for at least €5,000 and if it is considered more efficient (though the concept of “efficiency” will remain blurry until there is consistent case law on the matter). Consumers who live outside Spain will have to opt in to claims in any event.
• The Directive requirements for consumer associations entitled to bring cross-border collective actions are extended under the draft bill so that they also apply to associations which may bring domestic Spanish collective actions. Only those associations which meet the requirements will be considered as qualified entities with legal standing to file collective actions.
• Successive actions are likely under the new draft system, with plaintiffs proving in the first instance the defendant's liability, and then proving in the second phase the harm caused.
• The bringing of a representative action will cause the suspension of the limitation period for individual actions in respect of infringements committed on or after 25 June 2023.
• Jurisdiction and competence will lie with the courts of first instance, irrespective of the subject matter of the proceedings, in the place where the defendant has his registered office or place of business (for the majority of cases, Madrid and Barcelona); and, in the alternative, the place where the infringing act was committed or has had its effects.
• Redress agreements are allowed by the new draft. Nevertheless, judicial approval is required, ensuring consumers’ right to individual compensation. The agreement shall contain the amounts to be paid to each beneficiary, if possible, or the maximum amount of compensation and the criteria for distributing it among the consumers concerned. The agreement shall be binding on the consumers and users concerned who have not expressed their wish to withdraw from being bound. After court approval, a new representative action cannot be brought on the same subject, even by a different representative entity.
• Requesting access to sources of evidence. These requests in the exercise of a representative action coincide with the current requirements for requesting access to sources of evidence, although the draft bill is adapted to the particularities of a representative action.
• The enforcement of monetary compensation falls on the plaintiff. Consumers who can justify that they are eligible for compensation out of a lump sum awarded against the defendant should apply for recovery through an electronic platform, without the need for the involvement of a lawyer. Once the compensatory amounts due to consumers have been determined, the remainder of any money paid by the defendant into the court’s account, if any, shall be returned to the defendant.

This preliminary draft will now need to be firstly approved by the Council of Ministers for it to be then assessed and enacted by the Parliament, not before June.

Pitfalls regarding mass actions

Although there are limited procedures for bringing mass actions in Spain and there is a low number of such actions, this is slowly changing. For example, there is a growing impetus in the market, when multiple persons have been affected, to organise themselves in associations or platforms in order to bring a claim.

The main pitfall, that should be dimmed with the implementation of this Directive, is the limited regulation currently existing, that does not favour mass actions when compared with individual litigation or accumulated actions. Spain does not currently offer an effective procedure to manage mass actions; however, it is well known that the Spanish legislator is looking forward to establishing a more efficient procedural scenario that would help to expedite justice by reducing the general workload, and the RAD is likely to present that opportunity.

For queries related to Spain, contact Fernando Gutierrez and Cristina Alcalá Martínez-Sagrera

Information for the Netherlands last updated 5 April 2023.

The current mass actions landscape

Since 1 January 2020, the Netherlands has had one regime for bringing collective compensation claims. Interest groups, associations or foundations can sue under the Act on Redress of Mass Damages in Collective Action (WAMCA) for the interests of certain groups of legal persons or a general interest as set out in the articles of the association or foundation. In cases of mass damage, litigation can be conducted for damages, but also for a mere declaration of rights.

The WAMCA requires interest organisations to be sufficiently representative in respect of the interests they purport to represent. In addition, there are requirements regarding the governance of an interest organisation; publicity requirements; expertise - the interest organisation must have sufficient experience and expertise with regard to the interests being represented; and the financing of the interest organisation. An admissibility test applies and an exclusive interest representative must be appointed if several interest organisations bring competing claims. The WAMCA uses an "opt-out" system whereby claimants can withdraw from the proceedings through a declaration.

Between 1 January 2020 and 31 December 2021, a total of 54 collective claims were filed under the WAMCA (18 in 2020 and 36 in 2021). These cases involved public interest/human rights (13 cases), consumer protection (11), intellectual property/counterfeiting (11), labour law (8), privacy/data abuse (4), public health (3), competition (2), bankruptcy/creditor protection (1) and commercial law (1). Defendants in these cases are companies/legal entities (30), the Dutch State or a public institution (16) and, finally, natural persons (8).

Of the total class actions filed, 18 were brought against foreign defendants. Seven cases involved collective claims in which no Dutch party was a defendant, but the claim was brought against one or more foreign defendant(s). Foreign defendants are usually globally operating companies that offer services and/or products in the Netherlands and which services are also purchased by Dutch natural and legal persons. As a result, a close link with the Netherlands is readily established, so it is not surprising that they are sued in the Netherlands.

The WAMCA also allows collective proceedings to be funded by third parties. Of the 54 claims filed, 15 were externally funded. These were funded not only by well-known commercial third-party litigation funders, but also by "special purpose vehicles", US law firms, and the Dutch Consumer Association. In all cases, the external funders demand a percentage of the result achieved as remuneration, sometimes plus part of the costs incurred.

The impact of the RAD

The Netherlands completed its transposition of the RAD on 1 November 2022.

As the WAMCA has already proven to be an effective system for collective redress, the adopted legislative amendment in the Netherlands shows that transposition of the RAD only entails slight amendments to the current provisions dealing with collective actions. The legislative amendment will come into force on 25 June 2023.

Further to the current obligation that representative organisations need to publish information on their website about the status of pending proceedings, the transposition incorporates the requirement that representative organisations also need to publish information about the results of actions. Regarding funding by third parties, the transposition includes the RAD’s restriction that class actions cannot be brought against a defendant that is a competitor of the funder or against a defendant on whom the funder is dependent.

Furthermore, several amendments to existing articles will affect cross-border actions. If a qualified entity in another member state brings a case before the Dutch court, the court shall no longer be allowed to review all of the current, more extensive WAMCA requirements of Article 3:305a Dutch Civil Code. This is because organisations designed by member states as qualified entities for the purpose of bringing cross-border actions under the RAD are effectively thereby granted mutual recognition across the EU. For a Dutch qualified entity to bring an action in another member state, the requirements that shall be added entail, firstly, that the representative organisation must prove that it has been publicly active in the area of protection of consumer interests for 12 months; secondly, that the representative organisation is not the subject of insolvency proceedings and is not to be declared insolvent; and thirdly, that information about the sources of the funding of a representative organization in general must be made publicly available.

Lastly, Article 1018f(5) Dutch Code of Civil Procedure has been amended to reflect the RAD’s restriction that consumers domiciled in a Member State other than the Member State in which the collective action is brought, can only be bound by the outcome of a collective action if they explicitly agree to it. This is a departure from the current position in the Netherlands, whereby it is possible for an opt-out mechanism to apply even to foreign claimants.

Pitfalls regarding mass actions

The amendments that transposition of the RAD will bring to the current Dutch system will arguably not dramatically change the current mass actions landscape. The new rules on cross-border actions will arguably further increase the amount of cases before the Dutch courts, as they will include procedures on the designation of organisations for such cross-border collective actions.

On the other hand, something to keep in mind regarding the opt-in mechanism for consumers domiciled in another Member State is that it requires a lot of effort and investment from a representative organisation to get into contact with these consumers and help them to join the collective action in a Member State other than the Member State in which they are domiciled. This could lead to the outcome that the group of foreign consumers is smaller than under the Netherlands’ current opt-out mechanism.

For queries related to the Netherlands, contact Machteld Hiemstra and Stefan van Kolfschooten of Pinsent Masons.

Information for Luxembourg last updated in November 2022.

The current mass actions landscape

Although there is currently no comprehensive procedure for mass actions in Luxembourg, the courts have allowed parties to bring a type of “mass action” through the use of “test cases” – a mechanism also used in the Republic of Ireland, for example. Such a mechanism has been used in Luxembourg, for example, for the Madoff case.

The General Data Protection Regulation (GDPR), directly applicable into Luxembourgish law, also allows not-for-profit organisations which:

• have statutory objectives in the public interest,
• mention their active mission in the field of the protection of personal data of data subjects, and
• have a clear mandate from data subject(s), to take legal action for the cessation of a breach of the GDPR and/or damages.

There have been a number of recommendations in recent years from third-party groups, public authorities and the courts that a formal mass action procedure and third-party litigation funding be introduced into Luxembourgish law. In August 2020, the minister of consumer protection tabled a Bill to introduce a collective action procedure into Luxembourg consumer law. Following the adoption of the RAD, government amendments to the Bill were tabled in January 2022. These have faithfully transposed the RAD, though the Bill as a whole goes further than the RAD in a number of respects.

The Bill is still at a preliminary stage and will need to be debated. Several opinions have been delivered, including a first opinion of the Council of the Luxembourg Bar Association, dated 14 September 2022. New government amendments were tabled on 16 September 2022 to make some shape and substantive adjustments. It is therefore the second amended text of Bill No. 7650 that is currently being discussed before the Luxembourg Parliament. The opinion of the Conseil d’État on this Bill is expected in the coming days or weeks.

The impact of the RAD

The Bill is still under discussion. Its provisions may therefore develop in the coming weeks and months. However, the latest government amendments provide useful clarification on various aspects. Some key aspects of collective actions under the Bill are as follows.

Financing collective actions

The costs, potentially including lawyers’ fees, will be borne by the unsuccessful party, applying the "loser pays" principle. It is possible to use financing by a third party, for example an investment fund, an asset management company or a private individual or legal person. The amended Bill contains the necessary measures to prevent and punish possible situations of conflict of interest. Indeed, the absence of conflict of interest is a condition for the admissibility of the collective action and a review can take place throughout the procedure, as well as the taking of necessary measures by the judge.

Finally, it should be recalled that parties in Luxembourg have free recourse to the out-of-court settlement of a collective dispute, since these costs are covered by the State budget. As a result, consumers who have suffered harm have an effective alternative to litigation, by using a mediator in order to be compensated free of charge and in a faster manner.

Scope

A representative action will be capable of being brought before the courts where several consumers in a similar or identical situation suffer damage caused by the same business. The damage will need either to have had, as a common cause, a breach of the business’s legal or contractual obligations; or to result from one or more breaches found in an action for an injunction or for a prohibition.

The legal or contractual obligations of the business referred to above include those originating in the provisions of EU consumer law listed in Annex 1 to the RAD; the policy areas covered by these laws are wide-ranging, including data protection, financial services, travel and tourism, energy and telecommunications, as well as general consumer law such as rules on unfair contract terms and misleading advertising.

In addition to the cases provided for in Annex 1, collective redress shall also be applied to disputes between consumers and professionals supervised by the Commission de surveillance du secteur financier (CSSF), the European Central Bank or the Commissariat aux assurances (CAA).

Persons who can bring a collective action

Actions will be capable of being brought by a consumer who is part of the group, authorised association, designated ad hoc association, qualified entity designated in an EU or EEA Member State, or sectoral regulatory entities established (CSSF, CAA, CNPD, ILR, ALIA, ILNAS, Direction de l’Aviation civile, Direction de la Santé). The Luxembourg law will therefore go beyond the RAD, by allowing individual consumers to pursue collective actions; the RAD regime only envisages representative actions being pursued by qualified entities.

Competent court and applicable procedure

An application to bring a collective action will be submitted, investigated and judged in accordance with commercial procedure, before the District Court of Luxembourg, sitting in commercial matters. First, there is a first judicial phase where the court decides on the admissibility of the action. The judgment on admissibility or inadmissibility, once final, will be published on the website of the Ministry responsible for Consumer Protection.

The judgment sets out the terms of membership of the group that will be implemented if the parties decide to start a process of out-of-court settlement of the collective dispute. The procedure for the extra-judicial settlement of collective disputes occupies a very important place in the text of the Bill and begins with a mandatory information meeting. If the parties reach an extra-judicial agreement, it will be homologated and published.

If the parties refuse to take this route, or do not reach an extra-judicial agreement, the judicial procedure continues with a view to obtaining the cessation or prohibition of the breach or a judgment on liability. Where the collective action seeks compensation for the damage suffered, the Court shall rule on the liability of the business in the light of example individual cases. The Court determines the categories of damage that can be compensated for each consumer and defines the modalities of compensation.

A liquidator responsible for the implementation of any judgment on liability is appointed. At the end of the compensation period, the liquidator shall make his report and an order to close the liquidation shall be issued.

Opt-in or opt-out

The court determines the applicable system, which can be by inclusion in (opt-in) or by exclusion from (opt-out) the group. Only an inclusion (opt-in) system is applicable when the collective action concerns either compensation for bodily injury or non-pecuniary damage, or consumers residing outside the Grand Duchy of Luxembourg.

Disclosure

The Court may order, at any time during the proceedings, any measure of inquiry useful for the preservation of evidence and the production of documents, including those held by the business, subject to the rules of confidentiality and proportionality.

Pitfalls regarding mass actions

For now, we are still at the stage of discussions on the Bill, which can always evolve. But there is a real will on the part of the Luxembourg public authorities to implement a collective action regime in Luxembourg fairly quickly, and probably before the end of the current legislature in 2023. The planned judicial procedure is particularly complex to implement at different stages. The path of an extra-judicial agreement seems to be preferred, while the subject of mediation is not addressed in the RAD.

According to the authors of the Bill, the rights of the plaintiff, the consumers concerned, and those of the defendant business must be protected from abusive and untimely actions. To do this, the collective action is subject to specific conditions and benefits from the procedural guarantees of ordinary law, in particular those provided for by the New Code of Civil Procedure. In addition, punitive damages are contrary to Luxembourg legal tradition, and damages awarded cannot exceed the compensation that would have been awarded in an individual action. Luxembourg law prohibits the quota pact litis, which would allow the lawyer to receive remuneration exclusively based on the result.

These safeguards should be enough to avoid the excesses of a US-style class action regime. However, it is not certain that the procedure currently envisaged is very efficient, and it risks creating many procedural pitfalls: deadlines to be respected, possibilities of recourse, mediators trained in collective actions, risks of conflicts of interest, international jurisdiction issues, forum shopping, and so on.

For queries related to Luxembourg, contact Eric Perru of Pinsent Masons.