Spain's consumers win new "collective actions" safeguards in new organic law bill
Published on 22nd Jul 2024
The opt-out system is a crucial component of the reform and a fundamental change in how litigation is conducted in Spain
The proposed legislation on measures to improve the effectiveness of the Public Justice Service and encourage collective efforts to protect the rights and interests of consumers and users intends to thoroughly overhaul collective actions to align with the requirements of Directive 2020/1828.
Categories of collective actions
Legal mechanisms known as "collective actions" safeguard the rights and interests of numerous individuals, usually consumers and users.
The bill regulates two forms of collective actions: injunctive actions, which aim to halt specific behaviour and prevent recurrence, and redress actions. Redress actions include compensation, repair and replacement of goods, reimbursement or price reduction, and contract termination. The latter, which refers to redress actions, introduces the most significant number of new features.
Legal standing
The regulation concerning the right to file lawsuits remains unchanged. In particular, the Public Prosecutor's Office and authorised consumer and user associations, whether national or designated in other EU Member States, are tasked with carrying out these actions.
The opt-out system, as a general rule
Regulating the participation process in collective redress mechanisms for damage actions is crucial. The proposal backs the opt-out approach, wherein the proceedings' outcomes are enforceable on all parties represented unless they specifically choose to opt out of the procedure.
The court can establish an opt-in system, requiring consumers to consent actively to a decision before it becomes mandatory. This is utilised in specific cases when unique circumstances warrant it for the proper administration of justice or when the claimed amount for each affected individual is over 3,000 euros.
Procedure and certification procedure
The bill describes a procedure distinct from a typical trial or oral hearing. An essential part of this procedure is the certification phase, which occurs after the claim is accepted. It aims to verify that the case is appropriate for a group trial.
This procedure requires a hearing to assess elements such as the court's authority and capability, procedural objections that could impede the proper progression of the process, and whether the authorised entity satisfies the criteria to proceed.
If the conditions are met, the court will issue a certification order to identify the behaviour and the consumers affected by the case. An appeal can be made to challenge this order.
The claim will receive a response within two months and be processed using the officially designated channel.
External financing of class actions
One of the significant changes concerns third-party funding of legal proceedings. The suggestion bans this possibility when a conflict of interest exists or when the financing is driven by a financial interest in the case's result rather than safeguarding consumers' rights. In such cases, the court will request the plaintiff to amend or terminate the funding agreement. If this is not done, the case may be dismissed.
The figure of the liquidator
When the identity of consumers and users is unknown, the responsible party must provide a specific amount to the court, as determined by the judgment. In such instances, the bill outlines the liquidator's duty to allocate funds to the rightful recipients. This individual must be a qualified accounting professional and will be selected through mutual agreement among the involved parties or, if that is unsuccessful, appointed by the relevant professional association.
Osborne Clarke comment
The legislature's effort to improve access to justice for consumers and users should be commended. However, the bill has received criticism due to its significant impact on litigation in Spain.
One of the most debated issues is the adoption of the opt-out system. Although this system has the potential to enhance judicial efficiency, it is somewhat constrained by our legal tradition. Therefore, it is crucial to clearly outline and provide accessible procedures for consumers to withdraw or opt out easily.
