Of interest.

The Recent Development of the Draft Law on Collective Proceedings

On 24 February 2020, the Government of the Czech Republic approved the prepared draft law on collective proceedings, and it will be submitted to the Parliament of the Czech Republic. The draft law clearly aims to transpose the forthcoming Directive of the European Parliament and of the Council. This article will briefly outline and evaluate the development of the draft law over the last few months and discuss some of the remaining controversial provisions and the resulting problems and risks that, in our view, have not yet been satisfactorily resolved.

Recent development of the draft law

Probably the most criticized issue in connection with earlier versions of the draft law on collective proceedings was the lack of protection against the abuse of collective actions, especially in unfair business competition. The performed modifications made in the draft law are undoubtedly positive in this respect.

Among other things, the conditions for the commencement of collective proceedings were significantly tightened up and the possibility of running the collective proceedings by a specialized administrator, whose motivation was considered purely economic, was completely omitted.

The draft law was further simplified, namely the relationship with the Civil Procedure Code was made clear in order to prevent complicated interpretation problems.

Also, the collective judicial enforcement of granted claims was given a well-arranged solution, while the original vision of registering the collective claims in the insolvency proceedings was rather completely abandoned. The last major change lies in limiting the scope of the collective proceedings to consumer rights only.

Outstanding problems

We still consider the issue of res iudicata resolved insufficiently, since the rights of members of the group of claimants, who have not really learned about their claims before these claims were assessed and settled “collectively” by the court in a collective proceedings (e.g. by quick settlement), might be damaged.

Further, quite problematic in our view is the power of the court to order the party to the proceedings to provide evidence in fact against itself, otherwise the concerned fact will be considered as proved.

Similarly, problematic is the present exception from the general rule that, in the case of a procedural succession, the new plaintiff must accept the state of the proceedings as it is.

In our view, the regulation of concurrence of the opt-out collective proceedings with the individual proceedings is unsatisfactory, in particular the situation where the individual proceedings are initiated after the court’s approval of the collective opt-out proceedings being run. We also see a potential risk of abuse of collective actions to theoretically endless prolongation of the limitation period to claim an individual right.

The question of the collective plaintiff’s remuneration in the event of a collective action for non-monetary performance remain somewhat unclear in the discussed draft law. Above all, the problem is who should pay the plaintiff’s remuneration in such case, since the members of represented group of claimants should not bear any costs of the proceedings and simultaneously the punitive damages have no legal grounds in Czech law, so the defendant also should not be forced to pay anything similar.

The issue of statutory default interest payments could also easily become a problem in complex and potentially very lengthy collective proceedings.

There is still doubt as to the merits of the vision that the introduction of collective proceedings will help unburden the courts, which will not have to deal with a greater number of individual claims. In our view, the actual effect would be exactly opposite.

Finally, the noticeable preference of non-profit organizations as collective plaintiffs in the current version of the draft law is also potentially problematic. The privileged role of non-profit organizations defending consumer interests might easily result in unhealthy competition between them and the expansion of purpose-built cases.

Conclusion
It can be stated that the upcoming legislation on the collective proceedings has relatively realistic outlines and, in principle, we have no doubt that it will be possible to actually use it in legal practice. We will continue to monitor the legislative process and inform about the progress hereof.

 

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

 

www.peytonlegal.cz

 

28. 02. 2020

 

 

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