On 11 June 2013 the European Commission issued its long-awaited policy on collective redress. This included a Communication on Collective Redress, explaining the Commission’s thinking on policy, a Recommendation stating that every Member State should introduce a collective litigation mechanism and setting out common principles, and a draft Directive on competition damages. The Recommendation and the Directive are seen by the Commission as a package.
The collective litigation mechanisms prescribed by the Recommendation are intended to allow multiple claimants in “mass harm situations” arising from infringements of EU law to obtain an injunctive or compensatory remedy. Such mechanisms must take into account the legal traditions of the relevant Member State but must include a common set of principles which are set out in the Recommendation. These principles are essentially safeguards against abuse. They will be familiar to EJF members as being ones we have promoted over many years, though some have been watered down by the Commission. They include:
Encouragement of ADR as means for providing redress;
Stipulation of criteria for standing of representative entities to conduct representative actions;
Opt-in (unless duly justified by reasons of sound administration of justice);
Preliminary court certification before admission as a collective action, filtering out unmeritorious claims;
The ‘loser pays rule’;
No punitive damages and damages to be compensatory only;
Controls on funding and a court case management power to stay insufficiently funded cases, or cases where there is a conflict between funder and claimant;
The Recommendation takes the form of a horizontal framework; in other words collective mechanisms are to be available for all EU law infringements, not just anti-trust or other sector-specific applications.
Although the Recommendation is by its nature a legal but non-binding act (Article 288 TFEU), Member States have been given two years to put the mechanisms in place and implement the recommended principles. The Commission will then assess whether further (potentially legislative) action is required, four years after the publication of the Recommendation, to strengthen its horizontal approach. Some Member States will consider they have already implemented the recommendation and even exceeded its requirements. Other Member States will be starting from scratch.
The proposed Directive on competition damages does not address collective redress. Instead it deals with establishing a common set of other modalities of competition litigation for breaches of Article 101 and 102 TFEU and their national equivalents: disclosure of evidence, and limits on such disclosure by immunity recipient, limitation, alternative dispute resolution, joint and several liability, the availability of the pass-on defence, presumption of overcharge, and quantification of harm. It is intended that the proposal, if adopted, will facilitate bringing private competition damages actions within and across European jurisdictions.
Whilst the Recommendation published by the Commission will not require further legislative action, the proposed Directive will now undergo the co-decision legislative procedure in the European Parliament and the Council. Once a final text is adopted, Member States will have two years to implement it in their legal systems.
July 10, 2014 in 