Collective Actions in the European Union—American or European Model?

Abstract

Collective redress is a procedural mechanism that allows for reasons of procedural economy and efficiency of enforcement many similar legal claims to be combined into a single court action. Consumers and investors encounter problems with the enforcement of their rights through the individual redress, especially in times of the financial crisis. If a substantial number of harmed individuals decide not to pursue their, usually low, claims, the unduly gained profits of the opposite party can be extremely high. Thus, collective redress mechanisms can represent better option for consumers and investors, as their claims tend to be much less burdensome in case of the collective action. However, such mechanisms can trigger the abuse of the procedures, with the most commonly quoted threat being the example of American regulation of class actions. Negative characteristics of American model are the reasons that EU decided to shape its own concept of collective redress mechanisms. The binding act in this field in the EU is directive on injunctions for the protection of consumers’ interests; however, there is no binding act yet regarding compensatory actions. In June 2013, the European Commission published the Recommendation on common principles for injunctive and compensatory collective redress mechanisms in the Member States concerning violations of rights granted under Union Law. It is not binding on Member States, however, it can serve as a guideline to improve their existing legislations, especially the regulation of collective compensatory actions. In so doing, consumers and investors might be given the possibility to use more efficient mechanism to compensate the harm suffered.