The fragmented priorities and pace of EU member states in adopting national laws following the EU’s enactment of the Representative Actions Directive—a universal minimum-standards legal framework for representative actions aimed at protecting the interests of consumers—presents businesses and legal counsel with good reason to review their representative action playbooks in EU and non-EU regions of operation.
The Representative Actions Directive (the EU Directive) is the European Union’s latest solution for establishing uniform and unified legal standards throughout the union and expanding legal protections to the representative interests of consumers. For decades, each EU member state has had different legal rights and protections for representative actions that lacked cross-border considerations and, for many countries, substantive representative action case law and history.
While the EU Directive has applied to all member states since June 2023, the member states are moving at different paces, and with different priorities, to transpose the universal minimum-standards requirements into national law. Member states are afforded discretion in interpreting elements of the directive so long as certain key objectives are met.
Where member states exercise discretion such as with sectors to be subjected to representative actions, will not only affect jurisdiction shopping by claimants or qualified entities (QEs), i.e., a consumer organization or a public body, who acts as a claimant party, in the interests of and on behalf of these consumers and is formally recognized by a member state to do so and defendants, but also the reputation of member states regarding consumer and representative interest protections and legal and business risk.
While the EU Directive requires all member states to adopt key requirements into national laws, they have notable discretion to decide how specific elements of representative actions proceedings occur:
There are certain requirements and decision outcomes from the EU Directive that all member states must have within their respective representative action legal frameworks:
Under the EU Directive, cross-border representative actions may be brought in the EU across member states, including single actions across member states, for the first time. QEs, however, face a higher general threshold for cross-border representative actions compared to single-state actions, including a mandatory one-year or longer history of activity and involvement in consumer transactions. The EU also created a restricted information exchange platform, EC-REACT, to facilitate document, case, and repository cooperation and collaboration among courts, QEs, defendants, and member states in representative action proceedings.
The EU Directive maintains a consumer-friendly approach to representative actions by enabling cross-border representative action pursuit and offering public funding assistance, court fee limits, and access to legal aid. Claimants should be mindful of the application limits, procedure costs, and enforcement requirements in addition to the EU Directive’s consumer benefits.
Consumer Benefits
Limits of Application
Costs of Procedure
Enforcement
Unlike the Netherlands, France has a brief history of representative actions, which were implemented in 2014 and initially only addressed consumer law issues. In 2016, the scope of representative actions was extended to health product liability, environmental liability, personal data protection, and discrimination.
In March 2023, the French National Assembly adopted a proposed law to extend representative action scope and indemnification. The current pending bill before France’s Senate seeks to do the following:
The implementation of the EU Directive and its transposition into member state national law is expected to increase the number of representative actions in France as well as in England and Wales, the Netherlands, Germany, Portugal, and Slovenia.
The United States has a long and substantial history of representative action case law. It was the EU’s intent to compose the EU Directive with remedies to consumer representative action problems experienced in the United States.
Challenges with Representative Actions in United States |
EU Solution to US Challenge |
Difficult for defendants to exit representative actions |
Early dismissal of “unfounded” cases possible |
Motions to dismiss are difficult to win |
Early dismissal of “unfounded” cases possible |
Nearly zero limits on claims that can be brought |
Restrictions on claims that can be brought |
Plaintiffs’ bar has high reward/low risk and cost stakes |
More balanced risk/rewards because of potential for fee-shifting, opt-in only (likely smaller classes), and no potential for punitive damages. |
While the EU Directive offers solutions to several known challenges in US representative action law, there are demonstratable positive aspects of US representative action law that the EU and its member states may wish to consider for adoption.
In US tradition, individual plaintiffs, a select number of representative action members, bring a suit. If the individual plaintiffs prevail, all representative members prevail. Alternatively, if the individual plaintiffs lose, all representative members also lose on claims. The EU Directive does not currently offer clarification on how this approach would work using a QE model.
Additional Areas Open to Interpretation By EU Courts
As courts in each EU member state interpret their country’s representative actions laws, each state or jurisdiction will offer different benefits and risks to claimants and defendants alike. Cross-border representative actions are expected to bring higher case numbers in some states, while some others may see fewer actions. Large jurisdictions that are used to significant numbers of representative action cases will adapt readily, while it remains to be seen how smaller jurisdictions that are new to representative actions will react.
Looking to the future, companies and consumers should collaborate with legal counsel to develop an understanding of the representative actions legal landscape in the EU, identifying laws, developments, and potential risks and benefits in each region of operation or member state. As the EU representative action landscape undergoes change, representative actions developments in the United States, United Kingdom, and other countries should be considered as well, providing a more fulsome perspective of the global representative actions landscape.
If you have any questions or would like more information on the issues discussed in this Insight, please contact any of the following: