Council of the EU Agrees to Collective Actions Directive

10th Nov 2020

On November 5, the Council of the European Union formally agreed to the negotiated text of the EU Directive on collective actions. The Directive requires all Member States to establish their own collective action system to allow consumers to seek redress for breaches of EU law.

The Directive will harmonize some aspects of collective redress, however, Member States will have significant leeway to set up their own rules and safeguards against litigation abuses.

For example, the Directive sets out judicious safeguards for who can bring collective action claims in “cross-border” cases, including mandating that consumer representatives have experience, a not-for-profit status, consumer focused objectives, and independence from third party litigation funders and law firms.

However, the Directive does not mandate Member States to apply these safeguards for “domestic” collective actions, even though domestic collective actions can involve “cross-border” claimants and defendants.

Member States should use utmost caution when implementing the EU Directive and take this opportunity to improve the Directive and remove its loopholes. Careful consideration should be given to how consumers can fully and efficiently benefit from collective redress throughout the EU, and how to prevent such systems from being exploited by for-profit claimant law firms and third-party litigation funders.

The European Parliament is expected to formally adopt the Directive before the end of the year, after which, Member States will have 24 months to transpose the Directive’s provisions into their national laws.