Representative Actions Directive

Representative Actions Directive

The Representative Actions Directive (EU) 2020/1828 aims to ensure that consumers are able to protect their collective interests in the EU via representative actions, the legal actions brought by representative entities (so called qualified entities). It provides that all EU countries have in place a mechanism of representative actions. The Directive improves consumers’ access to justice while it also foresees appropriate safeguards to avoid abusive litigation.

Representative actions are actions brought by qualified entities before national courts or administrative authorities on behalf of groups of consumers to seek injunctive measures (i.e. to stop trader’s unlawful practices, similarly to what has been foreseen by the Injunctions Directive 2009/22/EC), redress measures (such as refund, replacement, repair) or both injunctive and redress measures.

The Directive aims to protect the collective interests of consumers in many areas of law and economic sectors, such as data protection, financial services, travel and tourism, energy and telecommunications. The Directive will apply to representative actions brought against unlawful practices (infringements) by traders as provided in the EU rules listed in its Annex I. All modifications to Annex I may be found at Eur-lex.  Member States may also decide to apply the mechanism of representative actions provided by the Representative Actions Directive in other or in all areas of law.

The European Commission proposal for the Representative Actions Directive was part of the Review of EU consumer law. 

What is the Representative Actions Directive about?

Globalisation and digitalisation have increased the risk of a large number of consumers being harmed by the same or similar unlawful practice. Large-scale abusive practices, such as the widespread use by banks of unfair contract terms in mortgage contracts or massive travels and flight cancellations without reimbursement during the pandemic are just some examples of cases where collective interests of EU consumers might have been affected.

However, the consumers affected may feel powerless and hesitate to take legal actions. They might be confronted to obstacles such as the uncertainty about their rights or about which procedural mechanisms are available, psychological reluctance to take action or the negative balance of the expected costs relative to the benefits of the individual action. Collective redress mechanisms, such as the one provided by Directive (EU) 2020/1828 are therefore needed to overcome the obstacles faced by consumers in individual actions. These mechanisms also contribute to fairer competition as they create a level playing field for traders operating in the EU internal market. They may have strong deterrence effect towards rogue traders.

Who brings representative actions and what for?

Consumers concerned by the same or similar trader’s unlawful practice are represented by a qualified entity, a consumer organisation or a public body, who acts as a claimant party, in the interests of and on behalf of these consumers.

Individual consumers concerned by a representative action are not claimants, but should be entitled to benefit from that action.

In a representative action for redress measures, the benefits should come in the form of remedies, such as compensation, repair, replacement, price reduction, contract termination or reimbursement of the price paid, as appropriate and as available under Union or national law depending on the specific circumstances of each case. In a representative action for injunctive measures, the benefit for the consumers concerned would be the cessation or prohibition of a practice that constitutes an infringement.

Consumers may also benefit from collective settlements that may be reached between the qualified entity that brings the legal action and the defendant trader. 

The representative actions can be domestic, initiated by a qualified entity in the same Member State where it was designated or cross-border, initiated in a Member State other than the one where the qualified entity was designated.

Where a qualified entity brings a representative action in the Member State in which it is designated, that representative action should be considered as domestic even if it is brought against a trader domiciled in another Member State and even if consumers from several Member States are represented within that representative action.

The Directive also makes it possible for entities representing consumers from different Member States to join forces within a single representative action.

On 25 June 2023, the Directive entered into application at national level. However, up to date not all EU Member States have transposed the Directive. The state of play of the notification of the transposing measures by the Member States to the European Commission may be consulted at Eur-lex.

Please see the list of the qualified entities enabled to bring cross-border actions, as notified by the EU Member States to the European Commission.

Member States publish the lists of qualified entities enabled to bring domestic representative actions at national level, on their national websites. 

How do consumers express their will to be represented in the action?

The consumers concerned by the action will be informed of upcoming, ongoing and closed representative actions.

Consumers will automatically benefit, as foreseen by national rules, from the outcomes of actions for injunctive measures. However, they would need to take a conscious choice whether they wish to be represented and subsequently benefit from the outcome of the representative actions for redress.

Member States have in principle the choice to provide for an opt-in mechanism, or an opt-out mechanism, or a combination of the two.

In an opt-in mechanism, only those consumers who explicitly expressed their wish to be represented will benefit from the action. In an opt-out mechanism all consumers on behalf of whom the qualified entity decided to bring the action will be represented and bound by its outcomes, unless they explicitly express their wish to be excluded from the action. It is for the Member States to decide at which stage of the action individual consumers will be able to exercise their right to opt in to or out of a representative action.

How are the representative actions funded?

The representative actions may be funded from public or private funds.

According to the Directive Member States have to provide qualified entities with the relevant assistance to ensure that they may effectively exercise their right to bring representative actions. They may for example, provide for public funding, including structural support for qualified entities, limit applicable court or administrative fees, or ensure access to legal aid. Member States may also allow qualified entities to require consumers who have expressed their wish to be represented by a qualified entity in a specific representative action for redress measures to pay a modest entry fee or a similar charge.

When Member States allow for the funding of the representative actions by funders who are not party to these actions (the so called Third Party Funding), they need to ensure that conflicts of interests are prevented. They must also ensure that funding by third parties that have an economic interest in the bringing or the outcome of the representative action for redress measures does not divert the representative action away from the protection of the collective interests of consumers.

Who decides on the procedural modalities of the national representative actions?

The Directive is principle based, with a fair margin of discretion left to the Member States on how to implement it. For instance Member States may choose whether the representative actions could be brought before courts or administrative authorities, or both depending of economic sector or a specific area of law.  That is why the choices made by the Member States within the transposition process are crucial for its effective application.

The European Commission has developed an IT tool, ‘EC-REACT’ - ‘the European Commission Representative Actions Collaboration Tool’ to support the effective functioning of the representative actions as set up by the Representative Actions Directive. This project fulfils the legal obligation imposed by Article 14(3) of the Directive. 
 
‘EC-REACT’ allows:

• Member States to notify to the European Commission the qualified entities designated to initiate cross-border and domestic representative actions;
• The European Commission to consolidate and publish the EU list of notified qualified entities enabled to initiate cross-border representative actions;
• Member States and the European Commission services to cooperate as regards the compliance by qualified entities with their designation criteria as set out by Art. 4(3) of the Directive, and as regards other aspects of the functioning of the representative actions;
• Qualified entities to cooperate on their activities as foreseen by the Directive;
• Judges and administrative authorities to cooperate in order to help the good functioning of representative actions across the EU;
• Member States to submit reports on the functioning of the representative actions to the European Commission and the European Commission services to consolidate this information into EU reports.

The platform allows for the cooperation within separated user groups, namely the representatives of the Member States, the qualified entities, and members of the judiciary for the coherent application of the Directive across the EU. It allows for an exchange within the discussion forums, requests for information or investigations and encrypted messages. It enables the document depository and has performant search and translation options.  
 
'EC-REACT' is a secure and restricted electronic platform available only to the pre-defined categories of users, subject to the access permission by the European Commission services.

On 26 November 2021 the European Commission organised an online workshop to discuss the implementation of the Representative Actions Directive (EU) 2020/1828.

The workshop brought together a diverse group of experts from the EU and from around the world including members of consumer and business organisations, representatives of EU countries, academics and practitioners who have experience with collective redress actions. Experts shared valuable insights on how the Representative Actions Directive could be most effectively implemented by EU countries.

The following topics, essential for the effectiveness of representative actions were discussed within three breakout sessions:

• Criteria for designating the qualified entities and admissibility of actions;
• The funding of actions and public assistance to qualified entities;
• Consumer information, consumer participation in redress actions and distribution of redress among consumers (including the use of IT tools).

Discussion papers, reports and recordings from the workshop are available here: Workshop on the implementation of the Representative Actions Directive (EU) 2020/1828

Starting from 25 June 2023, Injunctions Directive 2009/22/EC is repealed and replaced by the Representative Actions Directive.
 
The Injunctions Directive will continue to apply to representative actions brought by the qualified entities before 25th June 2023, as foreseen by Art. 22(2) of the Representative Actions Directive.
 
Please see the correlation table demonstrating how the specific provisions of the Injunctions Directive compare to the provisions of the Representative Actions Directive. References to the repealed Injunctions Directive shall be construed as references to the Representative Actions Directive and shall be read in accordance with the above-mentioned correlation table.
 
Please see below the list of qualified entities designated by EU Member States under the Injunctions Directive to bring actions for an injunction in other EU countries where the infringement originated.

List of the Qualified Entities