Both in the Czech legal environment and at the European level, legislative proposals are currently being prepared which should result in the establishment of so-called class actions in the Czech legal order. Given that at the European level, political agreement has recently been reached regarding the draft wording of Directive 2018/089 (COD) of the European Parliament and of the Council on representative actions for the protection of the collective interests of consumers (hereinafter referred to as the “Directive”), and given the importance of this issue for all traders, we have decided to devote the September legal bulletin to it.

Although the Directive is still in the legislative process, it appears that the result will be a minimum harmonisation regime. A minimum harmonisation regime allows Member States considerably greater freedom in its transposition, i.e., the application of their own conception of what the legal regulation should potentially look like. However, some parts of the Directive are already firmly established. The draft regulates legal relations between traders and consumers, potentially giving consumers a fundamental weapon – the representative action (more commonly known in ordinary language as a class action).

According to the draft Directive, a representative action is “an action for the protection of the collective interests of consumers to which the affected consumers are not party”. This definition immediately points to its two important elements. The first element is the purpose of these actions, which is to guarantee protection precisely to consumers. This protection also has a collective character. Instead of an individual action, an unlimited number of consumers will thus be able to join together and, represented by a qualified entity, bring an action against a trader who violates consumer rights. The second element is then the requirement for the existence of this qualified entity through which consumers will bring the action. Therefore, the Directive uses the term representative action rather than class action.

The impacts of this Directive will be reflected in the position of most traders focused on the consumer market. The positive news is that the collective action will be applicable only to breaches of legal obligations that occurred after the implementation (after adoption into the legal order of the Czech Republic) of the Directive, so in the near future there is no threat to traders of a change of rules in this respect. On the other hand, the scope of the Directive is conceived as very broad. Beyond general consumer law, areas such as data protection, telecommunications, environment and health, financial services, energy services, air and rail transport, travel and tourism will be newly included within the scope of the action.

The core of the new consumer rights lies in the possibility of requesting, through a qualified entity, compensation for damage. This represents a paradigm shift in the Czech environment. At present, most cases of violation of consumer rights are in fact resolved by public authorities (by imposing fines), most often on the basis of complaints from consumers. On the other hand, very exceptionally do individual consumers enforce their rights in court (because it is not economically viable). However, this economic disadvantage may disappear with the adoption of rules concerning class actions, and all consumers affected by a particular unlawful act of a trader will be able to jointly seek compensation for damage. Every breach of a legal obligation will thus be associated with a far higher degree of risk for traders. In addition to compensation for damage, the qualified entity will be entitled to demand the provision of a discount, return of unjust enrichment, demand refraining from a certain activity or directly its prohibition, or conversely an order that the trader continue with a certain activity.

The protection of traders against possible abuse of the class action institute is to lie precisely in the already mentioned obligation to bring an action through a qualified entity. The approach of the European Union aims to eliminate the abuse of class actions, and therefore these actions will have to be brought through a non-profit organisation, existing and caring for consumer rights for at least 12 months (before the date of filing the representative action), which will be able to demonstrate transparent financing.

In conclusion, we note that individual Member States, including the Czech Republic, may adopt even stricter legal regulation concerning representative actions. As mentioned above, the Czech Republic is currently preparing an act on collective proceedings (zákon o hromadném řízení), which is a purely Czech approach to class actions. It is anticipated that the Czech regulation could enter into force in 2022. It will therefore be interesting to monitor the development of Czech legislation in this area as well.

Mgr. Jiří Moravec J.D.

This text was originally prepared by the law firm Mašek, Kočí, Aujezdský in cooperation with the Association for Electronic Commerce (APEK) as legal bulletin No. 9/2020 intended for members of this association.

This text was translated from Czech to English using an AI translator.