New potential areas of litigation in France could follow directive on collective actions

New French legislation, the DDADUE 5 law, transposing Directive (EU) 2020/1828 on representative actions for the protection of consumers’ collective interests was enacted on 30 April.  This directive aims to harmonise  the mechanisms of collective actions across the European Union and provide consumers with enhanced access to justice.

In addition, on July 18, the decree designating the eight courts with jurisdiction over class actions was published.

Legislative journey

The Directive (EU) 2020/1828 was approved by the European Parliament on 24 November 2020, and published on 4 December 2020. This directive emerged from a long-standing effort to harmonise the European framework for collective actions, dating back to the 1980s (COM(84)692) and gaining momentum with the "New Deal for Consumers" launched by the European Commission on 11 April 2018 (COM(2018)183 final).

Key features of the new French regulation

• Unified legal framework: The new law replaces the sector-specific approach with a unified regime for collective actions. It allows associations to represent several individuals or entities in similar situations resulting from similar breaches of legal or contractual obligations by professionals, public entities, or private organisations managing public services (article 16).  
   
• Expanded scope: The law broadens the scope of compensable damages to include all types of damages, regardless of their nature. It also generalises the dual purpose of collective actions, which can seek both the cessation of the breach and the compensation for damages.  This expansion ensures that consumers can seek comprehensive redress for various types of harm, including economic, moral, and physical damages.
   
• Introduction and admissibility of actions: The law enables entities to introduce collective actions without the need for a prior notice or a prior decision establishing the breach. The court assesses the admissibility of the action and can reject clear ungrounded cases at an early stage. This provision aims at preventing frivolous lawsuits.
   
• Jurisdiction of the courts: The implementing decree of the DDADUE 5 law, published 18 July, appoints eight judicial courts to rule group litigation: Bordeaux, Lille, Lyon, Marseille, Nancy, Paris, Rennes and Fort-de-France.
   
• Right to act: The law extends the right to initiate collective actions to a wider range of entities (more numerous than the 14 associations initially authorised to initiate group actions in consumer matters). In addition to associations approved for this purpose, a list of which will be made available to the public, class actions can now be brought by non-profit associations that have been duly registered and active for more than two years and by certain trade unions. They can also be brought by the public prosecutor, who may act as the main party (but only in cases of cessation of a breach) and intervene as a joint party in any class action. European qualified entities must prove that they are included on the list published in the Official Journal of the European Union and may bring cross-border representative actions in France to protect the consumers’ collective interests.
   
• Funding and transparency: The law regulates third-party funding, ensuring transparency and preventing conflicts of interest. Entities receiving third-party funds must disclose the funding sources and ensure that the funding does not influence the conduct of the collective action (article 16). Claimants in group actions will now be required to inform the public about the group actions brought and the progress of the procedures. Additionally, a public register of ongoing group actions will be maintained and published by the Ministry of Justice.
   
• Civil sanctions for deliberate faults: A new provision in the Civil Code allows courts to impose civil fines on professionals who deliberately committed faults to gain undue profit, with the fines directed to a fund for financing collective actions (article 1254 of the French Civil Code). This provision aims at deterring deliberate misconduct and provide additional funding for collective actions.
   
• Cross-border actions: The directive facilitates cross-border collective actions, allowing qualified entities to represent consumers from multiple Member States. This could lead to substantial claims involving numerous plaintiffs across Europe.

Philips Respironics: a case study

The class action brought in Italy against Philips is the first action based on European Directive 2020/1828.

The case involves allegations that Philips' respirators contain polyester-based polyurethane, or PE-PUR, foam, which degrades and releases harmful chemicals posing health risks. This action is spearheaded by Global Justice Network  and the Italian consumer rights organisation ADUSBEF, seeking compensation of at least €70,000 per user for over 1.2 million users, totalling €84 billion.

This action follows Philips' announcement of a settlement agreement in a similar case in the US, in which the company reportedly paid $1.1 billion for all claims without admitting liability.

Osborne Clarke comment

The new French law transposing Directive (EU) 2020/1828 represents a major development. It aims at enhancing consumer protection and access to justice while generating new challenges for businesses operating in Europe.

In the US, class actions are often used to encourage companies to settle. However, based on this new regulation, settling in the US without admitting liability now generates a legal risk in Europe. Likewise, if the European legal system becomes more attractive than the one across the Atlantic, it can be assumed that class actions in Europe will be the precursor to potential legal actions in the US.