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Class action act heading to senate

The Act on Collective Proceedings has passed its third reading in the chamber of deputies and is awaiting approval by the senate. It transposes an EU directive and aims to ensure better protection of collective consumer interests in disputes with businesses.

Scope of application of collective proceedings

The originally submitted bill limited the applicability of collective proceedings solely to consumers’ claims against businesses; this was the minimum scope under the (EU) directive on representative actions for the protection of collective interests of consumers. However, the amending proposal raised in the course of the legislative process extended this possibility also to ‘micro-businesses’: entrepreneurs who employ fewer than ten people and whose annual turnover or annual balance sheet total does not exceed CZK 50 million.

Plaintiff's fee

A fundamental change from the original bill was made to the maximum amount of remuneration of the plaintiff in collective proceedings. For their activities, attorneys should be awarded a portion of the awarded amount, adequately covering their costs and risks. This amount has been the subject of disputes from the outset, which is why the first draft envisaged two variants (5% and 25% of the awarded amount), with the government eventually approving the 5% variant. In the end, the chamber of deputies increased the maximum plaintiff's fee to 16%. Also, a cap of CZK 2,500,000 was introduced for fees set as lump sums. However, there are concerns that too high a fee may lead to speculative actions.

The chamber has also added to the bill the possibility for the court to reduce the fee. In situations where the amount of the fee is set as a percentage of the awarded amount, and that amount exceeds CZK 100,000,000, the court may reduce the percentage of the fee by up to half, without a motion, if its amount no longer seems reasonable in view of the actual complexity and length of the collective proceedings.

Opt-in regime

In other EU member states, collective proceedings are conducted either in an opt-in regime, which requires the active registration of the parties, or in an opt-out regime, in which all potential victims are parties until they de-register. The bill passed by the chamber of deputies envisages the more moderate opt-in regime. A proposal that participants with claims not exceeding CZK 3,000 would be under an opt-out regime (and thus have to de-register if they do not want to be parties to the proceedings) did not pass either. However, the number of registered consumers (and micro-businesses) required to initiate collective proceedings was reduced from 20 to 10.