This is a guest post by dr Rita Simon from the Institute of State and Law at the Czech Academy of Sciences that has been based on a report prepared by her for BEUC
Representative actions in the Visegrád
4 countries – real improvement?
Mass harms cause a mass of problems. In mass harm situations, collective claims
constitute a better means of access to justice than individual ones, especially
regarding bagatelle harms. Although certain collective redress mechanisms exist
all over Europe, their effectiveness is questionable. Studies such as “Evaluation
of the effectiveness and efficiency of collective redress mechanisms in the
European Union” and the “Fitness check of consumer law” showed that the existing
redresses are rarely used or they do not produce the desired results, in almost
all Member States. We can also observe the ineffectiveness of injunction
actions in the V4 countries. The New Deal for Consumers, which has been
published in April this year, aims to
strengthen the enforcement of consumer rights, which is the Alfa and Omega of
consumer protection. The proposed way of improving enforcement by the European
Commission follows the German, Austrian and French practice: the launch of representative
actions by consumer organisations will be supported more strongly by the
Commission. However, the question of whether such actions could be the best
solution for enforcing consumer rights and access to justice in the V4
countries should be posed.
Injunctive reliefs
Depending on who has the right to file for an injunction and how effective
the action is in practice, some key differences should be observed. In the Czech
Republic, only consumer protection organisations can file for injunctive relief;
in the other three countries some control authorities, such as the financial surveillance
authority or office of consumer protection or consumer ombudsman can also initiate
injunction actions. How often these authorities file an action often depends on
the consumer policy of the government in power. An interesting fact is that in
Hungary – similarly to in Spain - the state advocate also has the right to file
an injunctive action if the public interest is affected. Such actio popularis actions have been very effective
in eliminating unfair clauses, e.g. in financial service contracts. The yearly total
of filed injunctive actions is very low in the Visegrád 4 countries, at not
more than 1-2 actions per country. However, it should be pointed out that in
Hungary and Poland compensatory collective redress is available in combination with
an injunctive action, which significantly increases the impact of such a redress.
In contrast with this, in the Czech Republic, the consumer organisation often withdraws
the filed action, because of the length of the procedure or due to competency
problems between the courts and other supervisory bodies. In Poland, the
President of the Competition and Consumer Protection Office (UOKiK) does not have an obligation to initiate an
injunction procedure automatically at the request of a consumer organisation or
the ombudsman; it is at his discretion. A further criticism is that an
injunction decision against a foreign trader is not enforceable, and it is
reported in all the Visegrád countries that consumer organisations generally
lack sufficient financial and human resources. The impossibility of consumer organisations
to demand monetary compensation is problematic in the Czech Republic and
Slovakia.
Other existing mechanisms – class action, and actio popularis
Class action mechanisms as a form of group action have been in force
since 2010 in Poland, and in Hungary since January 2018. Group actions popped
up in Poland like mushrooms and were filed in very different areas, such as
construction disasters, mass poisoning and unfair clauses in credit or travel
contracts, but also against motorway operators and against a regional
authority. The number of suits initiated is over 100, but many claims were rejected
due to the limited scope of application of the class action. Class actions can
be initiated exclusively regarding tortious conduct and product liability, but
claims for personal injury and infringement of human rights (health, body integrity, good reputation image, etc.) are excluded from the
scope. In contrast, the Hungarian scope of application does not exclude
personal injury, but limits the fields of law in which class action can be
used. Therefore, a group action can be filed in Hungary in labour and consumer
disputes and over some health claims resulting from environmental damage. Group actions
in both countries follow in some respects the US class-action model but, regarding
joining the group, just an opt-in possibility is given, and the Polish model in
particular contains numerous safeguards to avoid malicious, ruinous claims.
As other interesting collective redress, Hungary improved its “actio popularis” rules in 2012 and
differentiated between so-called public
interest actions and public interest
enforcements, which can be commenced if the infringement has harmed a large,
identifiable group of consumers, or has caused a significant disadvantage. The
public interest action can end in two ways, first with a declaratory judgment establishing
the infringement or second with a cease and desist order on its own or with a
case order accompanied by a restitution order. In the first model, which ends
with the declaratory judgement, consumers have to file a simplified follow-on
damages claim. In this claim, they need to prove the causal link between the
infringement and the extent of the damage suffered. A public interest enforcement presumes a prior administrative process
that has established the infringement. Despite high expectations, this type of
claim has so far not achieved its purpose. Collective actions have been filed much
less often after the amendments than before 2013. This can be explained by the
continuing decline in consumer financing and the abolition of the Department of
Collective Action at the Consumer Protection Agency. In addition, the
reluctance of consumers to file follow-on complaints regarding the damage suffered
needs to be emphasised, as does the lack of information on the existence of actio popularis decisions.
Unlike in Hungary and Poland, the two other Visegrád countries have not
introduced new group action mechanisms yet; the Czech legislator is working on
a class-action proposal, but the new government has not given
priority to this entering into law. Business associations, especially the
banking association, have been trying to have the legislation shelved until the
new Directive on representative actions has been announced.
Are representative actions suitable collective redress models for the V4
countries?
The proposal for the Directive allows "qualified entities",
such as consumer organisations (but also ad hoc entities), to launch actions on
behalf of all consumers. These entities will have to satisfy minimum
reputational criteria (they must be properly established, not for profit and
have a legitimate interest in ensuring compliance with the relevant EU law).
Compensatory collective redress actions will also be available. A very
important feature of these actions is that, in order to protect the interests
of consumers, the above-mentioned entities will be entitled to seek redress by
repairs, exchanges, reductions and termination of the contract or repayment of
the purchase price. A very interesting innovation is that if a prior
administrative or court decision has assessed an infringement, it should be
taken as irrefutable evidence in any subsequent redress action not just in the
same but also in other Member States. This emphasis on the acceptance of court
and administrative decisions should avoid legal uncertainty and unnecessary
costs for all parties, including the judiciary. Such a new development could certainly
bring positive changes; the only question to pose is whether the legitimacy of
bringing representative actions should be reserved for consumer associations
alone.
In the Visegrád 4 countries, there is considerable concern that - due to
the lack of funding of consumer organisations and the impossibility of
receiving funding from third parties - these entities will not be able to
perform properly. The situation, which has been observed in current injunction
practices, will not improve in the future. It should therefore be recommended
that other state organisations (e.g. consumer authorities, the ombudsman,
financial supervisory authorities and trading standards agencies) should also receive
the right to launch these collective actions. The state organisation has better
access to evidence and it has a bigger legal department than consumer organisations.
To support the participation of consumers in civil law proceedings, it seems useful
to introduce parallel “clean” opt-in class action models in all the Visegrád
states. It is also recommended to define the form and content of simplified
individual follow-on-damage claims, similar to the Hungarian model after public interest/enforcement actions. These
changes should be proposed with sufficient precision at the European level,
because otherwise is can be assumed that the national legislatures of some
countries (including the Visegrád states) would not make their collective redress mechanisms significantly
more effective, due to the resistance of business and banking associations. Without
simple, clear and feasible collective redress, the enforceability of consumer
rights will not improve in Slovakia and the Czech Republic at all and just a
new rule on paper will be announced.
