Approval of bill signals major reforms to Spain’s class action landscape
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|Name of policy / law / regulation||Draft Bill for the Protection of the Collective Interests of Consumers|
|Issuing agency||Spanish Council of Ministers|
On 20 December 2022 the Draft Bill for the Protection of the Collective Interests of Consumers, which is designed to transpose the EU Directive on Representative Actions for Collective Interests (2020/1828) into Spanish law and repeal Directive 2009/22, was approved. On 9 January 2023 it was made available for public consultation and multiple interested parties have already made contributions (mostly related to the opt-out system, legal standing and enforcement proceedings). An in-depth analysis of the bill’s promise to replace Spain’s current class action regime and institute numerous new regulations is thus essential to understanding its impact.
The current regime can be characterised as various sets of rules in the Spanish Code of Civil Procedure regulating specific procedural aspects (eg, legal standing, intervention, preclusion and enforcement) along with other substantive legislation (eg, the General Contracting Conditions Act, the Unfair Competition Act and the General Act for the Defence of Consumers and Users). There is no comprehensive and unified regulation on the matter.
Conversely, the bill foresees a specific, unified system for bringing class actions. This will be implemented by introducing a new Title IV to Book IV of the Code of Civil Procedure, consisting of 58 new articles; this would replace most of the current articles addressing these matters. As under the current regime, the new system will apply to consumers only.
The material scope of the regulation proposed by the bill would allow class actions to be brought in sectors that are not mentioned in Annex I of the directive.
Impacts on the class action landscape
The main aspects of the bill, which substantially modifies the Spanish current regulation for class actions, are as follows.
According to the new directive’s provisions, the bill provides redress measures for the first time – Directive 2009/22 included injunctive measures only.
Both redress and injunctive measures can be brought simultaneously in the same proceedings and for the same conduct. However, the court can order that both actions be brought separately if the matter is highly complex or if doing otherwise may delay the process.
The bill will confer legal standing on qualified entities that represent the collective interests of consumers to bring class actions. The following will be considered qualified entities:
- the public prosecutor;
- the National Consumer Institute and the corresponding bodies or entities of the autonomous communities and of the local corporations competent in the defence of consumers and users;
- qualified entities of other member states; and
- consumer organisations created to bring domestic class actions or cross border class actions. The organisations that have requested designation as a qualified entity for this purpose must meet certain requirements (eg, demonstrate 12 months of actual public activity in the protection of consumer interests before its request for designation) to avoid abusive litigation.
Unlike under the current regime, groups of consumers that have suffered damages will no longer be entitled to bring class actions and individual consumers will no longer be able to intervene as a party in the proceedings.
The bill foresees that proceedings on class actions for the protection of the collective interests of consumers will be resolved by first-instance courts, regardless of the subject matter.
The disclosure provisions applicable to antitrust damages actions will be extended to proceedings involving class actions.
The bill states that a claim seeking injunctive measures will be admissible only if it is proven that the claimant has requested that the trader cease the infringement with at least 15 days' notice. Injunctive measures are not subject to statutory limitations.
Special process for redress measures
A special process is to be implemented for redress measures. The most important phases of this will be as follows:
- The claimants should include certain information in a statement of claim, including the infringing conduct giving rise to the damage for which redress is sought, the consumers affected and whether there is homogeneity among the requests from the consumers concerned.
- A certification hearing will take place after the claim has been admitted and any issues raised by the defendant (eg, lack of jurisdiction or competence) must be resolved during this. The required homogeneity of consumer claims for redress measures will be discussed and the court will refuse the certification if the redress measure is manifestly unfounded.
- A certification court order will be issued after the certification hearing. It must establish the infringing conduct (objective scope) and the consumers affected by the process (subjective scope).
The order has important effects on individual actions. In general terms, claimants that have filed an individual redress measure will be offered the possibility of being bound by the class action within 10 days while ordering the suspension of the proceedings.
The court will dismiss the proceedings if the claimant refuses to be bound by the class action or fails to respond to the request.
Consumers concerned by a class action for redress measures will be provided with an opt-out mechanism. They will be required to express their wish not to be represented by the qualified entity in the class action. Otherwise, they will be bound by the outcome of the class action.
In exceptional circumstances, the court can decide that only those consumers who have explicitly expressed their wish to be bound by the class action will be affected by the outcome of the proceedings – if the amount claimed is over €5,000. An opt-in scheme has also been implemented for affected consumers who do not usually reside in Spain.
Redress settlements can be reached as an alternative to end the controversy. The request for approval will state the amount to be paid to each beneficiary or each category of beneficiary established in the settlement, if applicable. When possible, it will express the total amount to be paid as compensation and the criteria and procedure for distributing it among the consumers and users affected.
The court will approve the redress settlement unless it considers it unduly prejudicial to the rights and interests of the consumers affected or contrary to mandatory provisions.
Approved settlements will be binding upon the parties, and the consumers affected who have not refused to be bound by those settlements.
Enforcement of decisions
For the judgment to be enforced, the bill requires the judgment to be final and differentiates the following:
- For monetary judgments with identified beneficiaries, the defendant must comply with the judgment and pay the consumers affected directly within the established period. The defendant must request the information needed to make the payment from the beneficiaries.
- For monetary judgments where not all beneficiaries are identified, the court will, based on its estimate, set the maximum amount of the sums to be paid to the consumers and users affected. The defendant must deposit this within the period established in the judgment and the qualified entity will be responsible for distributing the amounts to the beneficiaries. Any amount remaining after the payments are made must be repaid to the defendant.
- For non-monetary judgments, the defendant must comply with the judgment within the period established for all beneficiaries identified. Potential beneficiaries not identified in the judgment must prove to the defendant that they meet the applicable requirements.
Control of third-party funding
For the first time, qualified entities should allow courts or administrative authorities to assess whether third-party funding involves a conflict of interest.
There will be a conflict of interest when the third party has an economic interest in the outcome of the class action that differs from that of the consumers.
Public registry of class action
Finally, a public registry of class actions will be created, including information on the consumers affected by the representation action, the judgment itself, the deadlines for requests to enforce the judgment or the redress settlement and more.