New European Directive gives teeth to consumer rights (and there are many…!)

Frank Peters & Michelle Krekels & Louis Berger
20 Jan 2021

The Netherlands leads the way in Europe with the possibilities of instituting class actions. In this manner, large-scale infringements of people’s and companies’ rights can be efficiently exposed.

This will now become possible in all European countries, at least for consumers. For a consumer alone, it is often too expensive or impractical to recover damages from a company, especially if that company is located abroad. It is much more efficient to join forces. There are various interest groups, such as the Consumers’ Association (‘de Consumentenbond’), the Dutch Home Owners’ Association (‘Vereniging Eigen Huis’) and the Automobile Association (‘ANWB’), which work to achieve this on a structural basis. If a mass damage case occurs, there are also ad hoc entities that achieves this. The ad hoc entities, which are constituted for the purpose of a specific action, are usually financed by a litigation financier.

The European Parliament gave its consent on 24 November 2020 to the ‘Directive on representative actions for the protection of the collective interests of consumers’. The Directive is part of the New Consumer Deal to strengthen European consumer rights and their enforcement. This includes rights that result from European regulations and directives in areas such as unfair commercial practices, tourism, product safety, energy, financial services, telecommunications, product liability and data protection.

From 24 December 2020, Member States have two years to adapt their legislation if they do not yet comply with the Directive. The new national provisions must then be applied from six months after that.

The Netherlands already has a developed, and recently with the introduction of the WAMCA, extensive legal system in this area and drastic changes do not seem necessary. What is new is that the Directive leaves almost no room for newcomers to this practice, the so-called ad hoc entities for cross-border claims. The Directive works with a list system for interest representatives who want to operate across borders and bring consumer claims. Member States have to draw up a publicly accessible list of representative organisations (‘qualified entities’) for cross-border claims. Member states would have to submit the list of qualified entities for cross-border claims to the European Commission. The competent authorities should meet the criteria laid down in the Directive. One of these criteria is that, in principle, the qualified entities for cross-border claims must prove that they have been publicly active in the area of protection of consumer interests for 12 months (Article 4(3)(a) of the Directive).

Regarding domestic claims, Member States are allowed to designate ad hoc representative entities for the pursuit of domestic claims (recital 28). These entities should be listed in national electronic databases which are publicly accessible through websites providing information about the designated competent entities (recital 63). The requirements for the appointment of representatives to pursue domestic claims are left to the discretion of Member States in accordance with national law. However, these requirements should be in line with the objectives of the Directive. Member States may choose to apply the requirements applicable to representatives in respect of cross-border claims also to representatives pursuing domestic claims.

Although the WAMCA now also sets stricter requirements for claim foundations, the prior designation of claim foundations as competent bodies and the inclusion of the claim foundations in a public database or a list system has not been a hard requirement to date.

Collective actions occur in almost all areas of law. The collective action team of bureau Brandeis has specialists in collective actions and settlements of mass damage cases. Examples are the diesel fraud cases and the case against Oracle and Salesforce for violation of privacy rules. bureau Brandeis often works together with leading interest groups and litigation financiers. The team also acts in mass damage cases that are primarily conducted in the United States, but which have offshoots in the Netherlands.

For questions or comments, please contact Frank Peters, Michelle Krekels and Louis Berger.