Implementation of the Collective Redress Directive has extended Austria’s existing collective action mechanisms

What is the most common type of collective action you are seeing?

Association Actions (Verbandsklage) enforced by consumer protection associations under the Unfair Competition Act and Consumer Protection Act are currently most common. With the implementation of the new collective redress regime claims for damages and data protection will likely increase.

What are the various ways a group could bring a collective action?

Existing mechanisms

• Association actions (Verbandsklage): This action can particularly be enforced by consumer protection associations under the Unfair Competition Act and Consumer Protection Act. Such actions are generally admissible when the association is acting in public interest and represents interests of consumers in the context of aggressive or misleading and thus anti-competitive business practices. In their actions, consumer protection associations may assert claims for cease-and-desist in its own name. The judgment is only effective between the parties (inter-partes). Thus, even though a decision by the Austrian Supreme Court disallowing certain business practices has persuasive authority, it does not automatically allow affected consumers to directly rely on such judgment, especially when individual factual questions have to be assessed in any follow-on claims for damages or repayment.
• Austrian-style class action (Sammelklage österreichischer Prägung): Consumers assign their claims to an association, or a special vehicle established solely for enforcing collective claims (SPV). They assert the claims assigned in their own name, but on the account of all individual consumers. The court decides all claims in one proceeding.
• Model lawsuit (Testprozess): It is common practice for individual consumers to enforce their claims in "test cases" with the help of the Association for Consumer Information (VKI) or a comparable association. The success of such a test case is then published by the association in the media. The idea is to alert consumers of their claims and subsequently to enforce them with the help of the association. Legally, the judgment is – again – not binding for further proceedings.
• Declaratory Proceedings (Feststellungsverfahren): In employment issues the Labour and Social Court Act (ASGG) provides a special proceeding. Bodies with collective bargaining capacity (kollektivvertragsfähige Körperschaften) may file an application directly with the Austrian Supreme Court for a declaratory judgement on the existence or non-existence of rights or legal relationships. A judgment has no direct effect on the employee, who must still assert his claims against the employer in his own proceedings. However, it helps, as the facts have already been established.

New mechanism according to the Collective Action Directive

In addition to the existing possibilities, the new Acts implementing the Collective Action Directive (Verbandsklagen) provide for redress actions. "Qualified Entities" (mainly specific consumer protection associations and some state bodies) may file representative actions, provided that affected consumers have opted-in:

• Injunctive actions (Verbandsklage auf Unterlassung), if public consumer interests are concerned.
• Redress action (Verbandsklage auf Abhilfe), if at least 50 consumers are affected. As part of this action, the Qualified Entities or the defendant may also file an interim application for a declaratory judgment (Zwischenfeststellungsantrag) on the existence or non-existence of rights and legal relationships. The court shall only make a decision on the claims for redress of individual consumers after the decision on any interim declaratory applications has become final.

With the possibility of redress action, the new mechanism of collective enforcement according to the Collective Action Directive goes beyond the classic association action described above.

If collective actions are permitted, are these opt-in or opt-out actions?

Redress action, class action and model lawsuits are opt-in actions.

Does the law currently provide for private collective actions by consumers?

Yes, the class action has that effect, even though the consumers usually do not sue in their own name, but rather assign their claims to a single association or SPV who then files the action.

If collective actions are permitted are the usual forms of relief permitted and can punitive damages be claimed?

The following forms of relief can be requested depending on the nature of the claim: performance (e.g. compensation, repair, replace, refund, publication of judgment), declaratory relief or an injunction. Claims for omission and publication of the judgment might also be asserted.

There are no punitive damages.

Are bodies which represent consumers able to bring actions on their behalf? And if yes, can these bodies bring cross-border actions?

Yes. Only in case of the association action and the representative actions the law specifically stipulates which bodies may file which action, the relevant bodies which may bring association claims are listed in the Austrian Consumer Protection Act. Bodies that may file representative actions are named in the new Acts implementing the Collective Action Directive or will be approved as qualified bodies upon request.

The Austrian Consumer Protection Act does not state whether the bodies listed therein may bring cross-border association actions to court. However, it does provide that certain bodies of other Member States may file such claim in Austria, if (a) the origin of the infringement is in Austria, (b) the purpose of the statutes justifies the action and (c) the interests protected by the body are affected in this Member State. These bodies must have been designated by a Member State to bring cross-border representative actions pursuant to Art 5 of the Collective Action Directive.

The new Acts implementing the Collective Action Directive expressly name certain Austrian qualified bodies that can file cross-border claims in course of representative actions (Austrian Chamber of Commerce, Chamber of Labour Law).

Is third party funding of litigation permitted?

Yes, third party funding is permitted for class actions and representative actions under the new Acts implementing the Collective Action Directive.

Is litigation funding permitted for collective actions?

Yes, funding by litigation funders is permitted, since they are no professional legal representatives and such agreements do not constitute a violation of the prohibition on “quota-litis agreements”. Lawyers however cannot work on a contingency fee basis. Moreover, with regard to representative actions under the new Acts implementing the Collective Action Directive, the litigation funder may neither be a competitor of the defendant company nor economically or legally dependent on it to avoid conflicts of interest. Litigation funders may also not exert undue influence on the representative proceedings.

Are consumer groups and law firms allowed to advertise the collective actions they are running?

Yes, but law firms have to adhere to strict professional requirements which prohibit aggressive advertisements.

Is there a formal mechanism to settle actions on a collective basis?

In Austrian-style class action proceedings, consumers can choose whether to be bound but must let the claimant know prior to the settlement. In representative actions consumers have in principle no participation right. However, with regard to the new redress action, joined consumers are automatically bound to the settlement approved by the court. This does however not apply to out-of-court settlements. Settlements based on association actions, model lawsuits and declaratory proceedings are in contrast only binding for the parties. They therefore do not provide for the possibility to settle actions on a collective basis.

If a trader loses a collective action does the law require the trader to publicise this?

Only if the claimant has requested publication of the judgement.

Is there a penalty for non-compliance with a final decision issued in respect of a collective action?

If a party does not comply the claimant enforces its rights by a separate enforcement action. A penalty is only imposed by the court in the case of non-compliance with a request of an imposed action or omission.

Contacts

With thanks to our friends at Dorda. Please contact Dr Axel Anderl, [email protected]

The Collective Redress Directive must be implemented in all EU member states by 25 December 2022. To find out more about the current progress of implementation of the Directive in this jurisdiction click here.