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Collective redress: New consumer rules must safeguard against abusive litigation
The American Chamber of Commerce to the European Union (AmCham EU) supports the efforts of the Commission to guarantee a high level of consumer protection and provide redress to individuals who have been harmed by illegal practices. The newly endorsed proposal on representative actions enables consumers across the European Union to launch class action cases on a variety of legal matters. However, we are disappointed with the rushed final compromise text for the Directive that was agreed at the end of the Croatian presidency mandate.
Under high time pressure, the trilogue negotiators were expected to agree on a compromise that would avoid misuse of a European system by a ‘litigation industry’ on the one hand and consider already existing national systems on the other hand. This balance has only been partially achieved.
We welcome the addition of certain safeguards including the ‘loser pays’ principle and its link to national provisions, but we remain concerned by the provision that allows for third-party litigation funding. We strongly believe there should be stricter limitations on third-party litigation funding to prevent compensation meant for consumers ending up in the hands of lawyers and hedge fund entities. Stringent limitations for third-party litigation funding remain an essential safeguard and should be applied to both domestic and cross-border actions.
We are also concerned by the lack of important safeguards such as criteria for the evaluation of commonality of cases as well as the lack of position on opt-in over opt-out provisions, allowing for Member States to set their own, potentially divergent systems.
As the proposal moves forward into the implementation phase, AmCham EU is committed to remaining a reliable partner in raising awareness of consumer rights and supports a fair and coherent transposition process across all Member States.