The Class Actions Act and its current status
On 20 December 2022, the Ministry of Justice sent for inter-ministerial comments a draft law on class actions, which aims to introduce the institution of class actions into the Czech legal system. This procedural instrument should enable Czech consumers to jointly pursue multiple claims against an entrepreneur in a single court proceeding.
Author of the article: ARROWS law firm (JUDr. Jakub Dohnal, Ph.D., LL.M., office@arws.cz, +420 245 007 740)
Basic principles of the draft law
According to the published draft law, its scope would for the time being apply only to disputes between consumers and businesses, where the consumer group would have to have at least 20 members. Class actions would then be based on an opt-in rule, which means that the consumer would have to opt-in to the proceedings in order to become an interested member of the group. However, this interested class member will not be a party, but should become the plaintiff - a non-profit-making person who, according to the proposal, will be obligatorily represented by a lawyer in the proceedings.
To ensure that class proceedings are not abused, it should be necessary, inter alia, to certify that "the class action is not funded by a third party that is a competitor of the defendant, is dependent on the defendant, or that unduly influences the plaintiff in a manner that would harm the collective interests of the consumers affected by the class action." If the source of funds is from a corporate entity, the court will be required to ascertain the details of the beneficial owner. The Ministry of Justice also proposes to cap the percentage of the claimant's fee at either 5 or 25 % of the award.
Under the current proposal, the collective proceedings themselves will be divided into two phases. The first phase will first examine the question of the admissibility of the collective action. If the court decides in the affirmative, the proceedings on the merits can be opened. The regional courts would be competent to hear the collective actions at first instance.
Current state of the legislative process
The draft law is currently undergoing an inter-ministerial comment procedure, in which only the Industrial Property Office has so far expressed its views and has not submitted any comments on the draft. However, the draft law envisages an ambitious effective date as early as 25 June 2023. It is questionable whether the law will be discussed and approved by the deadline. However, this will not change the fact that the Czech Republic is already late in adopting the Class Proceedings Act, as Directive (EU) 2020/1828 of the European Parliament and of the Council of 25 November 2020 on representative actions for the protection of consumers' collective interests requires Member States to adopt the legislation necessary to comply with the Directive by 25 December 2022.