The groundbreaking class action lawsuit law is expected to come into effect this year.

Most likely already this year, harmed customers will be able to file class action lawsuits after registering, allowing them to claim even smaller amounts of damages, writes the daily newspaper Právo, which also quoted our law firm partner Jaromír Císař.

The draft law from the Ministry of Justice, planned to take effect this year, envisages this. However, some experts have reservations about the proposal.

"Nowadays, it often happens that a larger group of people is affected by a single unlawful act. In procedural terms, courts have to handle individual cases separately. The goal of the draft law is to enable the consolidation of these cases into one proceeding, thus saving costs for both the state and the participants," said Vladimír Řepka, spokesperson for the Ministry of Justice.

According to lawyer Jaromír Císař, the law could help in cases similar to that of the Bohemia Energy group, which in 2021 announced the termination of supply for approximately 900,000 delivery points. Its customers were then placed under the last-resort supplier regime (DPI), which significantly increased their energy bills.

"However, the draft law does not yet specify retroactive effect — whether it will be possible to claim consumer rights that arose many years before the law takes effect. The Slovak proposal allows claims from three years before the law’s effectiveness, which seems quite long to me. This is an important issue that should be carefully considered," said Císař.

The proposal was created based on the European Union’s directive on representative actions, which requires member states to introduce collective litigation to improve the enforcement of consumer rights. According to the draft available to Právo’s editorial office, harmed parties will join the class action by registering, i.e., a so-called opt-in system. The group must have at least 20 harmed individuals.

The original draft, proposed nearly six years ago by former Minister of Justice Robert Pelikán (ANO), envisaged an opt-out system, where all harmed individuals are automatically included in the lawsuit.

Non-profit status

"The opt-in system was chosen as more appropriate. Under the opt-out system, many people would be included in lawsuits without even knowing one is being filed on their behalf. The opt-in system requires little activity from the consumer — they just need to show willingness," Císař explained.

According to him, the law will mainly help in cases where individual lawsuits are not worth it for consumers due to small amounts and thus are abandoned.

However, the consumer organization dTest disagrees with the opt-in system. According to its director Eduarda Hekšová, active registration will lead to fewer harmed participants.

The draft sets out a so-called non-profit status for organizations representing groups of harmed parties in proceedings. Protective organizations will have to meet criteria set by the Ministry of Industry and Trade and register on a list maintained by the European Commission. dTest is expected to be among them.

Hekšová confirmed that dTest will apply for registration as soon as possible. "But the opt-in system increases the costs for such organizations already in the initial phase of proceedings, which includes searching for harmed individuals, gathering information and documents, and explaining the necessity of registration," she noted.

Fee from a won case

She added that non-profit organizations will also assume full responsibility for the litigation. In case of loss, the organizations themselves would have to cover all costs of the opposing party. The organizations operate on limited budgets and could not build a reserve for further class actions from such activities.

"Although the Ministry of Justice proposes to grant consumer organizations a fee from the won case, capped at either five or 25 percent of the awarded amount according to the draft’s variant, this only compensates for the risk and costs of the particular collective proceeding," Hekšová stated.

Risk of abuse

Císař, on the other hand, sees risk in this compensation. "The status is certainly correct, but there will be a danger of circumvention. The 25 percent fee seems very risky to me because it could attract opportunists — organizations that will organize class actions just to extract some kind of payoff from the defendants," the lawyer explained.

However, both Císař and Hekšová agreed that the draft is well prepared to ensure class actions are not misused against entrepreneurs themselves. Non-profit organizations will be reviewed by the court to verify they are not funded by competitors of the plaintiff, for example, to damage reputation or reveal trade secrets.

The law currently applies only to consumer disputes. Císař does not exclude that class actions could eventually extend to labor law relations, such as workplace discrimination cases. "Once this status stabilizes and people see how it works in practice and what it means, non-commercial discrimination could also be included. But I would not do it all at once," Císař added.

Author: Barbora Prchalová

Published in the daily Právo on January 4, 2023