Collective Redress Directive aims to unify the fragmented class action legislation within the EU – what will change in Finland?

Today, multiple consumers may easily be affected by the same harmful conduct of a trader due to globalisation and digitalisation. As part of the European Commission’s New Deal for Consumers, the European Parliament passed the Directive (EU) 2020/1828 on representative actions for the protection of the collective interests of consumers (“Collective Redress Directive” or “Directive”) on 24 November 2020. The Directive aims to improve the position of consumers within the EU by allowing consumer groups to initiate collective actions. Currently, the regulatory field of class actions within the EU is very fragmented.

In this article, we examine the main changes the Collective Redress Directive will bring from the Finnish perspective.

What will change?

The Directive will bring significant changes to the Finnish legislation concerning class actions. To date, no class actions have been initiated in Finland, but implementation of the Directive is anticipated to lower the threshold of class actions. Currently, class actions are regulated by the Act on Class Actions.

Qualified entities

In Finland, it is only possible for the Consumer Ombudsman to represent consumers in a civil litigation as a class action. By implementing the Directive, qualified entities will be able to bring representative actions. A qualified entity must fulfil the criteria set out in the Directive which includes, for instance, that the entity must have had prior activity in protecting consumer interests, it has a legitimate interest in protecting consumers, it presents a non-profit making character, it is not subject to insolvency proceedings and it is not collaborating with opposite economic interests than those of consumers. It must also be a legal person constituted in accordance with the national laws of the member state.

Consumer organisations have been specifically mentioned as an example of such entities. This means that in the future, other entities besides the Consumer Ombudsman can also have the possibility to represent consumers in class actions, given that they fulfil the criteria.

Scope

Prior to the implementation of the Directive, class actions are only available for matters relating to consumer protection. However, the Directive covers situations where a trader has allegedly infringed EU law, for instance within the area of data protection, tourism, financial services, energy services or telecommunications. Thus the scope of fields that can be covered by a class action will widen.

Cross-border actions

Bringing a cross-border class action is also regulated by the Directive and the new provisions will ease and unify the initiation of a class action in another member state. Currently, as the Consumer Ombudsman has been the only entity that has been able to bring class actions, the legislative situation on cross-border class actions has not been very clear because the sphere of matters within the Consumer Ombudsman’s authority are mainly related to Finnish consumer protection.

Issuing decisions on class actions

Currently, the Finnish Act on Class Actions has not restricted the forms of reliefs that can be claimed as class actions, meaning that it has already been possible to claim injunctions, refund, compensation, repair etc. under the Act. The Directive will not change this, but it will also bring the possibility for the Court to impose penalties, such as penalty payments, to ensure compliance with the decision.

Although the threshold is anticipated to lower, the prevention of abusive litigation has been taken into account in the Directive. For example, no punitive damages are available, and the principle according to which the losing party must bear the legal costs (already applied widely in the Finnish civil proceedings), is applied to class actions. The requirement that only qualified entities who fulfil the specific criteria can represent consumers also lowers the risk of abusive litigation. In addition, the Court has the opportunity to dismiss a case that is manifestly unfounded.

Concluding Observations

So far, no class actions have been initiated in Finland on the basis of the current Act on Class Actions, but it remains to be seen whether the implementation of the Collective Redress Directive will change the situation. The threshold to bring class actions is anticipated to lower by the Directive as more entities, such as consumer organisations, will be able to initiate class actions. Also, as the scope of matters where class actions are possible widens from the current status, more businesses should be aware of and prepared for the possibility that their actions may be subject to a class action, and that these class actions may also have cross-border elements.

The member states must apply the laws, regulations and administrative provisions implementing the Directive to national legislation by 25 June 2023.

Relevant links:

Directive (EU) 2020/1828 on representative actions for the protection of the collective interests of consumers and repealing Directive 2009/22/EC

“A new EU Directive signals the start of collective actions on behalf of the EU consumer” by Bryony Hurst

See also our Collective Redress Tracker to keep track on the implementation process of Member States.