The government has approved the class action lawsuits. But it does not make it easier to enforce rights

Chapters of the article

• Benefits of class actions
• Class action law in Czech law
• How not to improve consumers’ access to their rights?

Benefits of class actions

Class actions allow people to join forces in a single lawsuit. For example, when they have suffered similar damages because of the same wrongful act. By linking and uniting under one entity to help them recover their rights, they achieve many benefits:

• Economic savings – the costs of litigation are shared among all plaintiffs, which can be much more efficient and cost-effective than individual lawsuits. For example, people who would not have the resources to litigate on their own can have access to justice.
• More pressure on responsible parties: class actions can be used to put more pressure on companies, organisations or individuals who are responsible for damages. If a company sees tens or hundreds of customers standing against it, it can force it to negotiate and resolve the dispute more quickly. The problem can then be resolved more quickly, or the practices that led to the damage can be changed.
• More equal parties: would you dare to take on an energy supplier, a large car company or a factory that pollutes the neighbourhood and whose bosses have close ties to the municipal leadership? Imagining their top lawyers and your financial capabilities, quite possibly not. But even this disparity and imbalance of power can be overcome through class action lawsuits. When multiple people join together in one lawsuit, they are in a stronger bargaining position and can better defend their rights.

Around the world, class actions are typically used in cases of consumer disputes, environmental pollution, workplace discrimination or patent infringement. That is, in situations where there may be widespread damage or violation of the rights of a large group of people.

The regulation of class actions in Czech law

The introduction of class actions is mandated by the European Directive of 2020, which aims to increase consumer protection in the European Union. The Directive set out a framework within which Member States had until the end of June 2023 to adopt follow-up legislation. However, the government was rather slow to adopt the law and missed the deadline. Last year, the Ministry of Justice came up with a proposal. However, it has subsequently undergone significant changes that have transformed it for the worse in terms of consumer protection. So what does the proposed legislation consist of?

How can consumers not improve access to their rights?

The primary peculiarity of the law is that only consumer organisations can bring class actions. And even then, only those that have been in business for at least five years. However, there are very few such organisations operating in the Czech environment and it cannot be assumed that they will have the capacity to defend all the victims. Moreover, although there are often high-quality and erudite theoretical lawyers, they are not (and cannot be) very proficient in procedural law, i.e. in knowledge of court proceedings. Elsewhere in the world, it is common for consumers to be able to choose their own entity to represent them, typically a law firm.

The second limitation is the way in which people will be able to join a class action. In fact, injured clients will have to actively opt in themselves. So that means watching the news on the issue, noticing that a class action is coming and signing up for it. In addition, the current form of the law reduces the time that injured clients have to join a lawsuit to four months.

Thus, a much greater effort will have to be made on the part of the consumer organisation to publicise and explain the case. An alternative under consideration would be for all affected clients to be automatically included in the lawsuit and to opt out if they are not interested in litigation.

The strategy regarding the choice of the court that will rule on class actions is also surprising. This is because there will be only one Czech court, the Municipal Court in Prague. It is entirely appropriate that a single court should decide on a collective action. That is, after all, its essence. The question is whether it should be the aforementioned Municipal Court in Prague. It is already the exclusive court for the enforcement of industrial property rights. The question arises whether the capacity of that court will be sufficient for another large agenda.

The plaintiff’s fee (i.e. the consumer organisation that takes on the action) is capped at 5% of the amount awarded. Even this is a low and rather unusual amount compared to abroad. Again, it should be reiterated that the other side is likely to be a multinational company with a strong professional and economic background, which will require very careful preparation on the part of the claimant.