Of interest.

Collective Action Lawsuits Have Passed the Chamber of Deputies

On 10 April 2024, the Chamber of Deputies of the Parliament of the Czech Republic approved the Civil Collective Proceedings Draft Law, which will allow consumers and minor entrepreneurs to pursue their claims in court together through a collective action.

In this article, we will focus on the concept and basic principles of collective proceedings as they are addressed in the draft law and briefly discuss the content of the approved amendments.

The Official Reasons and Objectives for the Introduction of Collective Proceedings
The main official reason for the adoption of the draft law, apart from the obligation to transpose an European directive[1], is to balance private economic relations in situations where entrepreneurs take advantage of their stronger position vis-à-vis consumers and benefit from the fact that consumers do not, in the vast majority of cases, enforce their various claims against entrepreneurs, particularly those of a minor nature. Collective actions are thus intended to provide consumers with an effective tool to hold dishonest entrepreneurs responsible for their unlawful conduct.

The aim of the draft law, which has been debated in the Czech Republic for several years, is therefore primarily to strengthen the position of consumers. Consumers (and, rather surprisingly, also minor entrepreneurs, see below) will now be able to pursue their claims[2] jointly in cases where it is usually not worthwhile for them to bring separate actions, and the court will then issue only one judgment in the case. Currently, where a larger group of consumers is affected by the unlawful activity of an entrepreneur, the courts hear individual cases (if at all) in separate proceedings. Collective hearing should thus streamline court proceedings, save costs for both consumers and the defendants and unify the case law in factually similar cases, which would undoubtedly be positive from the point of view of the credibility of the courts.

The Czech Republic is in delay in implementing the above-mentioned European directive, as the deadline for implementation expired in December 2022 and the Czech Republic is now facing the risk of sanctions. The current effort to finally adopt the relevant law is therefore logical, but in practice, this step may also bring a number of risks and negatives therewith, especially in terms of various procedural complications and the possibility of abuse of collective action lawsuits. However, these will not be dealt with in detail in this overview article.

Opt-in vs. Opt-out
In the draft law now approved by the Chamber of Deputies, the so-called opt-in principle of collective proceedings remains exclusive, based on the necessity of active participation of persons asserting their claims. The opposite would be the so-called opt-out variant, based on the automatic application of the collective proceedings to the claims of all potentially affected persons until they eventually express disagreement with their participation. In addition to the exclusive opt-in option, the deputies also considered the possibility of combining with the opt-out option for small claims (up to CZK 3,000), but the relevant amendment was ultimately not approved.

The principle of opt-in is set in the draft law in such a way that a person who is a potential member of a group of persons asserting their claims against the defendant, but for various reasons is not interested in joining the collective proceedings or decides to withdraw from them, should not be sanctioned in any way for such a decision, nothing will prevent it from asserting its rights individually, or even collectively in another (even parallel) collective proceedings.

Not Just Consumer Disputes
In addition to the decision between the opt-in option and its combination with the opt-out option, the groups of persons to be protected by the law were also discussed during the legislative procedure, i.e. in particular whether collective action lawsuits will be used only to enforce consumer claims against entrepreneurs or whether other groups of persons will be allowed to participate in collective action lawsuits. Although the Government’s draft law envisaged its use only for consumers, a group of deputies advocated extending the regulation to so-called micro-enterprises, i.e. entrepreneurs employing fewer than ten persons and whose annual turnover or balance sheet total does not exceed CZK 50 million. During the legislative procedure, the minimum number of consumers, resp. members of a group of persons whose claims are being pursued in bulk was reduced from the originally proposed 20 to the currently approved 10.

Other Characteristics of the Draft Law
Both claims for performance and claims for determination can be dealt with in collective proceedings, and the draft law expressly provides for the possibility of conducting collective court proceedings also in cases which would otherwise fall within the subject matter jurisdiction of other authorities.

In the first instance, the Municipal Court in Prague will have exclusive jurisdiction over collective proceedings, and only specialised organisations registered on a special list, representing members of a group of persons with claims against the defendants, will be entitled to bring the action themselves. The collective plaintiff will have to be represented by an attorney and will be liable for any risk of losing in the collective proceedings, which he will also be obliged to finance himself (albeit with the possibility of using external resources). The deputies also considered the possibility of financing collective action lawsuits through state subsidies, but in the end the Government draft law was approved which does not provide for state (co-)financing of collective plaintiffs.

A highly debated sub-topic was the remuneration of the collective plaintiff. The original Government version of the draft law envisaged a maximum of 5 % of the monetary award or the value of the non-monetary award, but in the Chamber of Deputies by an amendment, the limit was increased up to 16 % and the possibility of using a lump sum remuneration of up to CZK 2.5 million was added, which should apply a priori to actions for non-monetary claims. However, a collective plaintiff should only be entitled to remuneration and costs when successful in the litigation.

Consumers or minor entrepreneurs themselves would not be parties to the proceedings at all and would have only very limited procedural rights, such as to inspect the court file, to comment on the subject matter of the proceedings or to raise objections against proposed settlement, against amendment of the collective action or against withdrawal of the collective action. The draft law deals with the issue of registering the claims to the collective proceedings in quite interesting way, where the applications are to be received and processed (including the correction of any deficiencies) not by the court but by the collective plaintiff itself. Disputes between registered collective members over the validity of their membership are then expressly excluded.

The draft law’s emphasis on the third party’s obligation to provide the court with the evidence necessary to assess the case is significant, not only under penalty of a fine but also with the stated possibility of the fact being deemed proved if the request for evidence is not complied with.

Transparency and Anti-Abuse Measures
The draft law provides for the establishment of a public register of collective proceedings, where essential documents therefrom will be published, which is intended to ensure both sufficient transparency of collective proceedings and a wider awareness of pending proceedings and their subject matter among potential group members with claims against defendants.

With respect to protection against abusive collective action lawsuits, the draft law imposes an obligation of the court at the outset of the proceedings to first assess and verify, whether a collective action is admissible, inter alia, the absence of a conflict of interest and abusive intent on the part of the collective plaintiff, compliance with the prohibition on funding of the collective plaintiff by a competitor of the defendant or, conversely, its dependence on the defendant, and in general the prohibition on the collective plaintiff being influenced by anyone in a manner that is contrary to the interests of the group. These procedural conditions are to be examined continuously by the court in the proceedings on the merits, even after a collective action is found admissible.

Assessment and Conclusion
The Government’s draft law has undergone several substantial amendments in the Chamber of Deputies, but the legislative procedure shows a tendency of the legislator to lean towards a minimalist approach while setting statutory measures against abusing collective actions. An exception in this respect is the surprising inclusion of minor entrepreneurs in the group of persons who can bring claims in collective proceedings, which is somewhat non-conceptual and may create scope for abuse of the law.

The Civil Collective Proceedings Draft Law will now be taken up by the Senate, which should consider it until 30 May 2024. We will continue to monitor the progress of the legislative procedure.

[1] Directive (EU) 2020/1828 of the European Parliament and of the Council of 25 November 2020 on representative actions for the protection of consumers’ collective interests and repealing Directive 2009/22/EC.

[2] The legislation should not apply to claims arisen before 24 November 2020, as under the draft law it will only be possible to bring collective proceedings for claims arisen thereafter.


PhDr. Mgr. Jan Ptáčník, senior attorney – ptacnik@plegal.cz

Mgr. Eliška Vítková, junior lawyer – vitkova@plegal.cz




10. 5. 2024