Today, the Competitiveness Council has adopted a common approach of the Council on the proposal on “Representative actions for the protection of the collective interests of consumers”, which is a part of the 2018 New Deal for Consumers. The European business community supports effective enforcement of consumers’ rights, but has concerns about the ability of the proposal to deliver real compensation for consumers.
Since the European Parliament has adopted its position in March this year, trilogue discussions will soon take place.
BusinessEurope Director General Markus J. Beyrer said:
“We call on the EU institutions to work towards a system that perfectly combines the objective of granting consumers access to compensation while at the same time removing the features that would fuel opportunistic litigation, often triggered by third-party litigation funders.
The EU now risks creating loopholes, leading to cases of abusive litigation which are not at all beneficial for consumers. We’ve witnessed such problems in other parts of the world where litigation funders often take up to 50% of the awarded compensations without any liability if the case is rejected by a court. This is an industry worth $100 billion in the US alone and it includes hedge funds entering this business due to high return on investment with low risks.
While we should reduce legal fragmentation in Europe, the latest Council’s approach is missing ambition on the proposal’s objective to reach a harmonised system across the EU. A minimum standard for all entities litigating - both domestic and cross-border - on behalf of consumers is fundamental for the effectiveness of and trust in any collective redress system.”
Widely used in the US, international litigation funders are starting to settle and become active in a number of EU countries. Third-party litigation funding introduces a profit-motivated stranger into the traditional attorney-client relation. This can lead to opportunistic litigation as well as to unreasonably prolonged judicial proceedings. Once fully installed in Europe these entities will be able to operate in a regulatory vacuum (only one EU Member State has rules on third-party funding activities).
BusinessEurope is part to a joint statement of 21 business organisations which reflects how the business community speaks with one voice on this proposal.
