The EU Directive on Representative Actions for the Protection of the Collective Interests of Consumers (EU) 2020/1828, otherwise known as the Representative Actions Directive or RAD, is the law on collective redress in the EU and came into force on 24 December 2020. Member States were given two years within which to transpose the Directive, which took effect from 25 June 2023.

The new regime responded to the increased risk of large numbers of consumers being harmed by the same or similar unlawful practices due to factors such as globalisation and digitalisation. The Directive seeks to ensure consistency throughout Member States with regard to collective redress and facilitate better access to justice thereby providing a minimum level of protection for consumers in the European Union.

While the deadline for transposition has passed, not all Member States have measures in place. It is still at parliamentary discussion stage in a number of countries such as Belgium, Estonia and Spain with draft laws proposed in Bulgaria, Luxembourg and Poland.

Per the Directive representative actions may be brought by representative entities or so called “qualified entities”. These are defined as:

“any organisation or public body representing consumers’ interests which has been designated by a Member State as qualified to bring representative actions in accordance with this Directive” (Article 3).”

Each Member State must designate at least one “qualified entity” and publish a list of qualified entities enabled to bring actions at national level on their national websites. They must also communicate to the EU Commission a list of qualified entities enabled to bring cross-border actions.

Actions may only be brought on behalf of consumers

Member States have discretion as to whether the representative actions are brought before the domestic courts or administrative authorities or both.

Representative actions may be brought in respect of many areas of law from product liability, financial services to data protection. Annex I of the Directive sets out of specific EU Directives and Regulations infringements of which may give rise to a cause of action. These include:

• the Product Liability Directive 85/374/EEU;
• the EU Medical Devices and In-Vitro Regulations 2017/745 and 746
• the General Data Protection Regulation 2016/679 (GDPR);
• the Supply of Digital Content and Digital Services Directive 2019/770;
• the Bank Charges Directive 2014/92/; and
• the Cross-Border Online Content Services Regulation (EU) 2017/1128.

When initially enacted Annex I to the Directive listed 66 Directives and Regulations covering areas such as product liability and safety laws, financial services, data protection, telecommunications and travel in respect of which claims could be brought. This list has expanded subsequently to include the EU Digital Markets Act and EU Digital Services Act and will expand further when with newly adopted measures such as the AI Act and the AI Liability Directive.

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.

This will depend on each individual member state. It is likely foreseeable that there will be a rise in class action being brought with new regime now in place as it is likely to create an atmosphere of increased collective redress across Europe.

Given the current focus on environmental, social and governance (ESG) and associated EU enacted and proposed measures such as the Green Claims Directive, Right to Repair Directive and Corporate Sustainability Due Diligence, among others, increased responsibilities are being placed on companies in this regard consequently making them more vulnerable to class actions.

A recent example of a class action in the UK linked to environmental damage being taken is that against Severn Trent Water and five other water companies for allegedly breaking competition law and misleading the Environment Agency as to the number of pollution incidents. The underreporting resulted in higher service charges to its customers due to the fact that the number of pollution incidents reported to regulators is a factor in determining the price that can be charged to customers. The first claim brought on behalf of 8 million customers is estimated at over £330 million.

In the Netherlands cases include one brought by NGO Fossil Free against KLM involving allegations of greenwashing in 2022 and in September 2023, a class action lawsuit was filed against a US chemical company in respect of environmental damage caused by per- and polyfluoroalkyl substances (PFAS).

The Directive is quite flexible in this regard and permits Member States to have an opt-in or an opt-out system, or a combination of both. This flexibility recognises that Member States may need to “respond to their legal traditions”.

In an opt-out system consumers are automatically represented by the qualified entity unless they expressly state that they do not wish to be and Member States must ensure that consumers may join the action even after is has been brought.

In contrast in an opt-in system consumers are required to express their wish to be represented by the qualified entity.

Where the consumer resides in a different Member State to where the representative action is being brought they will be required to opt in to the action.

The Directive is principle based and provides a generous amount of discretion to Member States on how to implement it. Therefore, individual Member states are responsible for determining the procedural formalities, which are generally determined by national procedural law and the normal court processes applicable in those countries.

The Directive allows for several forms of redress for consumers including compensation, repair, replacement, price reduction, contract termination or reimbursement of the price paid, as appropriate and as available under Union or national law, as well as injunctions.

Punitive damages are not available. Recital 10 addresses this by stating that the awarding of punitive damages should be avoided in order to prevent the misuse of representative actions. This aligns with the accepted norm in this context that damages should be compensatory in nature, restoring the claimant to the position they would have been in had the infringement not occurred.

Given the discretion afforded to individual Member States they may determine whether representative actions are brought before a jury or not.

The recitals of the Directive, in particular Recitals 10 and 42, make it clear that punitive damages should not be awarded.

Recital 10 provides that “to prevent the misuse of representative actions, the awarding of punitive damages should be avoided and rules on certain procedural aspects, such as the designation and funding of qualified entities, should be laid down.”

Similarly, Recital 42 provides “this Directive should not make it possible to impose punitive damages on the infringing trader, in accordance with national law.”

Thus damages awarded should be compensatory restoring the claimant, in as much as possible, to the position they occupied before the infringement took place.

Article 7 of the Directive provides that the courts or administrative authorities will assess the admissibility of representative actions in accordance with the Directive and national law. Beyond this it does not go into greater detail and therefore each individual Member State has discretion to apply their own conditions.

The Directive permits domestic and cross-border representative actions. The latter occurs where a qualified entity brings a representative action in a Member State other than that in which it is designated. If the qualified entity brings an action in the Member State it is designated in that is considered a domestic representative action, even if the representative action is brought against a trader domiciled in another Member State and even if consumers from several Member States are represented within the representative action.

Not applicable.

The Directive encourages collective settlements as can be seen from the wording in Recital 53 which provides that collective settlements aimed at providing redress to consumers that have suffered harm should be encouraged in representative actions for redress measures.

Article 11 concerns redress settlements and requires any settlement to be approved by the court or administrative authority having regard to the rights and interest of all parties, in particular, those of the consumers and whether the settlement contravenes any mandatory provisions of national law or includes unenforceable conditions.

Further, Member States are required to lay down rules to allow the court or administrative authority to refuse to approve a settlement on the grounds that it is unfair.

This may vary from one member state to another but generally regulatory enforcement findings may be relied upon as a basis to bring a class action or collective redress proceedings and will be supportive of the claimant’s case. However, the courts will still be required to establish other facts relevant to determining liability.

It is likely that there will be an increase in ESG-related class actions across Europe given the focus on such factors and associated EU enacted and proposed measures increasing the responsibilities being placed on companies in this regard and making them more vulnerable to class actions, as previously stated.

It is already apparent in a number of Member States such as the Netherlands where NGO Fossil Free filed a class action lawsuit against KLM involving allegations of greenwashing in 2022 and in September 2023, a class action lawsuit was filed against a US chemical company in respect of environmental damage caused by per- and polyfluoroalkyl substances (PFAS).

Another recent example is the UK class action against Severn Trent Water and five other water companies linked to pollution incidents.

Third-party litigation funding (TPLF) is allowed if permitted by the laws of each member state. It sets out certain requirements to be met:

• there is no conflict of interest between a funder and the claimant(s);
• decisions made by a qualified entity are not in fact unduly influenced by a funder; and
• the representative action is not funded by a competitor of the defendant trader.

Article 10 of the Directive provides that funding by third parties that have an economic interest in the bringing or the outcome of the representative action for redress measures should not divert the representative action away from the protection of the collective interests of consumers.

The general rule applied in many Member States is that the losing party pays the costs of the successful party and this is influential in dissuading unmeritorious claims. The Directive provides that the costs will continue to be governed by local law.

Given that the Directive is relatively new and is not yet fully transposed in all EU Member States focus remains on implementation for the moment and the manner in which the Member States implement their laws continues to be a source of interest.

A draft proposal for a directive governing the regulation of TPLF has been put on hold while the EC conducts a mapping exercise to collate information on the current regulations and practices on TPLF in Member States and any advances in this direction are unlikely until the Directive on representative actions has been implemented by all Member States.