EU class action-style suits should only apply to some laws, says EU Parliament

The Parliament's Legal Affairs Committee has published a draft report into what EU law makers should do to develop a standardised system of collective redress.

Collective redress refers to a scheme where many people in a similar situation participate in a law suit against one company or organisation over an alleged breach of the law.

The European Commission is currently considering whether to press for new legal principles to be established that would allow victims of unlawful activity to seek collective redress when organisations based abroad engage in an illegal practice.

It held a consultation with the public and businesses between February and April this year looking at whether it was necessary to expand on what member states were doing individually to facilitate collective redress.

Some EU legal systems have compensatory relief in collective redress cases, according to the Commission, whilst collections of people can stop an organisation behaving in a certain way by obtaining injunctive redress in disputes relating to consumer and environmental law.

A new collective redress system should set out a standardised format for cross-border disputes, the European Parliament's Legal Affairs Committee said

"In the event that it is decided after due consideration that a Union scheme of collective redress is needed and desirable ...  any proposal in the field of collective redress should take the form of a horizontal instrument providing uniform access to justice within the EU," the committee said in a report (13-page /194KB PDF) on collective redress.

Collective action should not be allowed to take place for a general breach of EU law, the committee said. Only specifically identified areas of EU law should be the target of collective redress cases, it said.

"Legal certainty will be increased by identifying the exact pieces of EU legislation where problems regarding the enforcement of rights of victims exist," the Legal Affairs Committee's report said. "Once this identification has taken place, the horizontal instrument should apply to damages actions in case of breach of the relevant legislation indicated as well as of EU antitrust rules."

Rules on how collective redress can be achieved should apply broadly to all areas of EU law selected for inclusion in the new framework, the committee said.

"Identical strong safeguards, relating to aspects such as the standing of a representative entity and the criteria for authorisation, access to evidence or the application of the loser pays principle, are needed irrespective of the sector concerned," the committee said. "A horizontal instrument is the best way forward in order not to introduce different sectoral legislation resulting in fragmented national procedural laws."

Only limited sector-specific rules should be included, it said.

The committee proposed that only "a representative body" that EU member states nominate should be allowed to bring a lawsuit for collective action under any new framework. Only individual compensation claims up to the value of €2,000 should be included in collective suits under any new system, the committee said.

Attempts should be made to settle collective redress disputes before they reach court and collective action court cases should be held in the countries where the defendant company is based, the committee said.

The European Commission recently outlined three possible courses of action over its collective redress plans.

Viviane Reding, the EU's Justice Commissioner, said that the Commission could drop plans to develop a pan-EU collective redress framework, provide only recommendations on how EU countries could improve collective redress measures or write new laws creating a new collective redress framework member states would have to adopt.

The Legal Affairs Committee said in its report that the Commission had yet to prove there was enough evidence that a cross border system was needed.

The Commission is currently examining more than 20,000 responses to its consultation and is expected to set out its intentions by the end of the year.