New class action act – what will it look like?
The bill on collective proceedings is heading to the chamber of deputies. This is the umpteenth attempt to comply with the requirements of the EU directive on representative actions for the protection of the collective interests of consumers, which requires the establishment of an effective and efficient procedural mechanism for representative (collective) actions.
Scope of use of collective proceedings
The bill envisages collective proceedings to be used solely for consumer claims against entrepreneurs. This is the minimum transposition required by the directive, making the Czech concept fundamentally different from the class action lawsuits known in the Anglo-American legal environment, which can be used to assert claims in various areas of law, including labour and environmental law. The widespread opinion based on foreign experience is that the Czech Act on Collective Proceedings should not be limited to consumer disputes.
Plaintiff’s remuneration
Collective action on behalf of a group of consumers can only be filed by a qualified non-profit organisation recorded in the list of entities authorised to file representative actions under the Consumer Protection Act. Such an entity shall act as the plaintiff in the proceedings and bear all obligations this entails, as well as the risk of failure in the proceedings. For this, the organisation shall be awarded remuneration from the amount won, in an amount that adequately covers its costs and risks. However, the exact amount of this remuneration is still subject to disputes: in the wording of the bill discussed by the government in August, two options were considered, i.e., 5% and 25% of the awarded amount; in the end, the government approved the 5% option. Supporters of this lower option have warned that too high a fee may lead to speculative actions, while its opponents fear that a low fee will not cover the costs of smaller proceedings, which will therefore not be initiated.
Opt-in or opt-out mode for consumers
Collective proceedings can generally be conducted either in the opt-in mode, where participants must actively register, or in the opt-out mode, where all potentially harmed parties are considered participants until they opt-out. Unlike previous proposals, the current wording of the bill applies the more moderate opt-in mode. The opt-in mode was chosen mainly because it respects every consumer’s choice, following the premise that 'the law aids the vigilant'. Supporters of the opt-out regime argue that consumers cannot be required to monitor notices of initiated proceedings on a regular basis and register on time.
Many points of the law (in particular those mentioned) will continue to be further debated in the chamber of deputies, which means that the wording of the bill may still undergo fundamental changes.