Of interest.

Collective actions in the Czech Republic?

At present, the Government of the Czech Republic is discussing a draft law on collective actions, which is intended to regulate the collective proceedings, including the legal enforcement of judgments and possible collisions with insolvency proceedings. The law should enable the effective enforcement of rights collectively, thereby reducing the risk of different legal assessments of factually identical matters. The main objective of the draft law is to make marginal individual receivables more attractive to claim in legal proceedings, especially for consumers.

The draft law presumes the subsidiary and proportionate application of the Civil Procedure Code, not in contradiction to the principles and purpose of collective proceedings. However, without the possibility of judicial discretion, some procedural instruments like the fiction of recognition of the claim, the possibility to decide without a court hearing and the obligatory concentration of the proceedings would be excluded. Also, the usual adversarial legal system of proceedings is intended to be complemented by some inquisitorial legal system elements.

No sectoral limitation of collective actions is expected in the draft law. The collective action should not be admissible only in the cases where a court settlement cannot be approved. The only conditions for conducting the collective proceedings are suitability for settlement of the dispute concerned and a sufficient number of potential claimants. A register of collective actions is intended to be run, in which the most relevant information on ongoing proceedings shall be published.

Both opt-in-based collective proceedings and a very complicated (and confusing) opt-out variant are present in the draft law. The opt-out variant is intended to be used for cases where the precise definition of the group of persons concerned is difficult and the claims of individual members will be of a rather minor nature.

Collective actions shall be decided by regional courts at first instance and the plaintiff’s obligatory legal representation by an attorney is presumed. Except for simpler procedures, the draft law allows only the so-called group trustee in the position of plaintiff, who should be an irreproachable, trustworthy and sufficiently solvent person with special accreditation for these purposes. The group trustee would be entitled to a commission of 20-30% of the receivables claimed.

In the draft law, the members of the group of persons concerned are not perceived as parties to the proceedings. Their position should be deliberately ambivalent – they will only have very limited procedural rights indeed, but on the other hand, they should not bear any personal responsibility in the case of unsuccessful action.

The collective proceedings are conceived as a two-stage or three-stage procedure. In the first stage, the admissibility of a collective action is concerned. The court should carefully assess whether the conditions for conducting collective proceedings are met, but without addressing the merits of the case. The proceedings on the merits of the case (the second phase) is conducted only if the collective action has been authorized before. While the opt-in proceedings end with a final decision on the merits, a third stage is intended for the opt-out proceedings, where the court is supposed to decide on the distribution of the granted payment (or other performance) among the members of the group of persons concerned.

The draft law is also supposed to regulate the rules for the legal enforcement of collective judgments (“collective execution”) and for potential collisions with insolvency proceedings (joint registering of the collective claims). It must be stated, however, that the draft law in this respect still has large reserves, as it does not contain the necessary technical adjustments to the Enforcement Code and the Insolvency Act.

In our opinion, there is a substantial risk that the draft law, if approved in its current form, probably would not lead to the achievement of its declared objectives and also would bring several non-systemic elements and even greater confusion and legal uncertainty into the Czech legal system. While we welcome the effort to incorporate the institute of collective action into the Czech procedural law, some of the proposed solutions are clearly ill-conceived though and probably would only lead to unnecessary delays and procedural complications.

 

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

www.peytonlegal.cz

 

15. 04. 2019

 

 

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