In November 2020, the European Union adopted Directive (EU) 2020/1828 on representative actions, introducing a new framework designed to strengthen consumer protection across the EU. The Directive seeks to ensure that consumers who suffer harm as a result of the same unlawful business practice have access to effective collective redress mechanisms.
The need for such a framework became increasingly apparent as digitalisation and globalisation expanded the reach of businesses and services across borders. A single unlawful practice can now affect thousands, or even millions, of consumers simultaneously, making individual legal claims impractical in many cases.
The need for effective collective redress became particularly apparent in the well-known Apple battery throttling controversy in 2017. While Apple apologised and introduced discounted battery replacements, the legal consequences differed significantly across jurisdictions.
In the United States, affected consumers benefited from a consolidated class action that ultimately resulted in a settlement worth up to $500 million, with eligible consumers receiving compensation without the need to commence individual proceedings. In Europe, however, enforcement largely took the form of regulatory fines imposed by national authorities. Although those fines penalised the conduct, they did not directly compensate consumers who may have suffered harm.
The case therefore revealed a gap in the European regulatory framework between regulatory enforcement, which may result in penalties for unlawful conduct, and private redress, through which affected consumers may seek compensation for the harm they have suffered. Against this background, the Directive was subsequently introduced to strengthen the availability of such collective redress mechanisms.
What is a Representative Action?
The Directive allows designated organisations, known as “qualified entities”, to bring legal proceedings on behalf of groups of consumers against traders that have allegedly infringed EU consumer protection laws. These qualified entities may include consumer associations or certain public bodies authorised by Member States to represent consumers’ collective interests, provided that they fulfil specific criteria.
The objective is to make access to justice easier where numerous consumers have been affected by the same conduct. At the same time, the Directive seeks to strike a balance between consumer protection and the legitimate interests of businesses by including safeguards against abusive litigation.
Importantly, the Directive does not replace existing national procedures. Instead, it establishes a minimum EU-wide framework while allowing Member States flexibility in determining certain procedural aspects of representative actions.
Key Features of the Directive:
One of the most important areas left to Member States is the choice between an “opt-in” and an “opt-out” system.
Under an opt-in model, consumers must actively join the proceedings in order to participate. Under an opt-out model, affected consumers are automatically included unless they choose not to participate.
The Directive also allows representative actions to be brought even where an infringement has already ceased, ensuring that consumers are not deprived of potential redress merely because the unlawful conduct has stopped. In addition, final decisions in representative actions may be relied upon in subsequent proceedings concerning the same trader and the same practice, helping to improve procedural efficiency and legal certainty.
Member States were required to transpose the Directive into national law by 25 December 2022 and must provide regular information to the European Commission regarding the use and outcomes of representative actions.
How Has Cyprus Implemented the Directive?
Cyprus implemented the Directive through Law 91(I)/2023.
A notable feature of the Cypriot legislation is its adoption of the opt-out approach as the default mechanism for representative actions. The Law refers to this as “representation by tacit consent”. In practical terms, this means that a qualified entity may commence proceedings on behalf of all consumers affected by an alleged infringement unless those consumers expressly indicate that they do not wish to participate.
However, consumers who are not habitually resident in the Republic of Cyprus must expressly opt in before they can be bound by the outcome of a representative action. This reflects the requirements of the Directive for cross-border consumers.
The Law also contains safeguards designed to prevent duplicate claims and double recovery. A consumer who is represented in a representative action cannot simultaneously participate in another representative action concerning the same subject matter against the same trader, pursue an individual claim based on the same issue, or recover compensation more than once for the same harm.
Conclusion:
The introduction of representative actions marks an important step in the evolution of consumer protection law in Cyprus. Although the new framework is now in place, its practical impact remains uncertain, as no representative actions appear to have been brought under the legislation to date.
Author:
Ioanna Patsalidou
Associate