Update: EU Parliament approves Collective Redress Directive

On 24 November 2020, the EU Parliament endorsed the “Directive on representative actions for the protection of the collective interests of Consumers” (the “Directive”). Following the publication of the Directive (which is expected to take place towards the end of the year) and its entry into force 20 days later, EU member states will have two years to implement the Directive and a further six months to apply the new provisions.

As the Parliament has also approved Annex I to the Directive as contained in the Council’s position, which explicitly includes the Product Liability Directive and the Product Safety Directive (among various industry and sector specific acts aimed at consumer protection) in the list of acts on which collective redress may be based, the Directive is expected to bring a major change to the landscape of product liability in Europe.

Up until now, the options available to groups of consumers for collective redress for product liability claims were mostly limited to the initiation of individual proceedings. Experience shows that the burden of having to go through litigation deterred a significant percentage of consumers from bringing an action. This is likely to change with the introduction of the EU Collective Redress Directive, which facilitates a bundling of claims and thus makes legal action more appealing from an economic point of view (see our posts here and here for an assessment of the Directive’s impact).

In addition, the introduction of the German Model Representative Action (Musterfeststellungsklage) has shown that qualified consumer groups are rather creative in seeking areas of application. It is expected that the EU Directive will give rise to further initiatives in this regard, in particular as it is not limited to declaratory motions like its German counterpart. The significant discretion EU member states will have during implementation will create additional risks, as some member states may choose to take a more claimant-friendly stance than others to attract high-profile and high-volume actions. The expected divergences and the increased liability risks make risk prevention strategies and a robust crisis management system to avoid scenarios of large-scale consumer actions more important than ever.