For years, countries in the European Union have offered different levels of access to a collective action against wrongdoing companies. While countries like Italy and Spain have effective systems for collective action in place, some countries lack any collective legal remedies whatsoever. However, these conditions will soon change thanks to a recent agreement reached between legislators in European Parliament earlier this week to implement new rules. The Collective Redress Directive will require EU member states to allow consumer organizations to represent the collective interest of consumers in court.
Support for new EU rules arose in response to the recent Volkswagen “dieselgate” scandal. Four years ago, the EPA revealed that the automobile manufacturer had violated environmental regulations by programming software in their diesel engines to cheat during emissions testing. While this fraud generated substantial litigation in the United States, many European consumers were left in the cold because of their inability to organize together in court. Frustration over these limitations prompted a widespread movement to improve legal protection for consumer rights.
While the Directive represents a profound step towards protecting consumer rights in Europe, it is fairly limited in scope. It only requires countries to allow group actions to be brought by non-profit organizations and only in the area of consumer law. While this will cover many important topics of litigation, such as data protection, financial service, healthcare, and environmental restrictions, it will not require countries to permit collective actions in other areas of law. Furthermore, under the Directive, courts will be empowered to dismiss what they view as “manifestly unfounded cases,” further limiting corporate liability.
Nonetheless, the Directive will certainly offer consumers with new opportunities to seek compensation for injuries from abusive business practices. If you have any inquiries regarding the Directive, please contact James Pedersen (jpedersen@lowey.com) at 914-733-7219