New law will build on EU directive aimed at protecting consumers and marks a significant change in Spain's support for group actions
Spain's Ministry of Justice has recently published a draft bill on representative actions for the protection of the collective interests of consumers. This bill will transpose European Union Directive (EU) 2020/1828 of the European Parliament and of the Council of 25 November 2020 on representative actions (Directive 2020/1828) into domestic law. Though significant, this is an initial step, as the draft bill will be subject to reports – notably from the Spanish Judiciary and State Council – before then being sent to Spanish Parliament to undergo legislative enactment.
Although it is safe to assume amendments will be made to the draft bill, it is important to highlight the features of the model that would implement the European Directive's requirement to ensure the protection of consumers' collective interests.
The first thing of note from a legislative standpoint is that the relevant provisions have been included in a new title of Book IV of the Spanish Law of Civil Procedure (LEC). As a result, the legal procedures for exercising collective representative actions are special processes regulated by provisions that will no longer be scattered throughout the LEC, as was the case up to now.
It also seems the draft bill has not merely made the changes that were necessary to comply with the requirements of Directive 2020/182. The system of collective actions has been overhauled completely to overcome regulatory shortcomings that, in part at least, underpinned the failure of the model introduced by the LEC of year 2000 to address existing issues.
For consistency with the terminology used in Directive 2020/1828, it has been proposed the bill uses the expression “representative actions” to refer to all actions for the protection of the supra-individual or collective interests of a group of consumers impacted by a harmful event. The action must refer to consumers, although the scope of the consumer relations that may be affected is unrestricted.
As has been the case up to now, not everyone has legal standing to bring a representative action: such actions may only be filed by qualified entities, domestic or international, that meet standards aimed at ensuring actions are not frivolous. In practice, these would be consumer and user associations and certain public institutions, such as the Directorate General of Consumer Affairs or equivalent regional bodies.
The aim has also been to ensure that these actions are handled by a small number of civil courts so that they can specialise in actions of this kind. Representative actions are complex disputes that rely heavily on the presiding judge effectively using the formal powers at their disposal.
To avoid duplication and improve co-ordination, the draft bill also foresees the creation of a Public Register of Representative Actions, managed by the Ministry of Justice, which will hold a record of ongoing collective proceedings, their subject matter, main milestones and outcome.
In line with Directive 2020/1828, the draft bill draws a distinction between representative actions that are injunctive and those that seek redress. In the case of the former, the changes are not significant: there is now a need to file a prior complaint to the trader or professional before filing a claim, which may lead to a settlement or “voluntary” injunction to avoid the action reaching court.
The most significant reforms – certainly the changes that are of most interest to traders and professionals – relate to redress actions as it will be possible, for example, to obtain collective judgments ordering the performance of considerations or collective terminations of contract. In this regard, the draft bill prefers an opt-out mechanism, ie, the cases of all consumers harmed by an event will be understood to be included in the action unless they have expressly opted out within the established deadline. However, that system is flexible – a court may establish a system whereby the action only affects consumers who opt in within a deadline if it considers that system to be preferable in a certain scenario. Indeed, an opt-in system must be followed in the case of consumers that have their permanent place of residence outside Spain.
Representative actions for redress must follow a special procedure, a cornerstone of which is a so-called certification ruling (auto de certificación). When a claim is filed, the court must decide if there are genuine grounds to admit the representative action for redress, ie, allow it to proceed in the form of a collective action. This will only be possible if, after a hearing, there is sufficient evidence of similarity among the claims of consumers and users affected by the conduct that led to the claim. When certifying the action, the court will establish the procedure's objective and subjective scope, decide on whether an opt-out or opt-in system will be used and set the timeframe within which affected consumers may opt out of the action and its outcome, or opt in.
Only once the court has set that time period and made a definitive decision as to the scope of consumers affected by the action will time start to run for the defendant to answer the claim and a trial be held to present evidence. The draft bill makes it possible for the court to deliver an initial decision as to the liability of the trader or professional and, if found liable, to then open additional proceedings to quantify the amounts owed or to ascertain what considerations are due to the consumers (in practice, this is unnecessary if the defendant reaches a settlement with the claimant).
To handle communications with the affected consumers, each action must have use of an electronic platform. This will primarily make it possible for consumers to opt in or out of the claim but will also prove useful throughout compliance or enforcement of the judgment or settlement.
Settlements and voluntary compliance
The draft bill also goes on to regulate two key aspects, which Spanish legislation had hardly addressed in the past. Firstly, it affords detailed provisions to regulate settlement arrangements, which it divides into those reached before and those reached after a certification ruling has been issued. Secondly, it contains provisions on how best to achieve voluntary compliance by traders or professionals with judgments or settlements, adapting the general rules on mandatory enforcement to the specifics of representative claims.
The changes proposed by the draft bill are therefore broad. Collective actions, particularly when representative actions for redress are brought, are procedures in which the courts will have wide and robust case management powers. These procedures will also be highly complex from a substantive, procedural and evidential perspective.
On paper, the package looks a major step towards bringing a credible group action regime to Spain. Yet the history of attempts to usher class actions into Europe is a reminder that procedural nuances and the general attitude of the judiciary will likely play decisive roles in determining the impact of such reforms.