Czech law opens the door to class actions

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Czech law opens the door to class actions

Czech law opens the door to class actions

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August 23, 2024

On 1 July 2024, the long-awaited Act on Collective Civil Proceedings (the Class Actions Act) entered into force, allowing consumers and small entrepreneurs to pursue their claims in court together through a class action.

The Class Actions Act transposes the EU Directive of 25 November 2020 on representative actions for the protection of the collective interests of consumers. The aim of the Act is to ensure that consumers and small entrepreneurs have access to courts, which they might otherwise be unable to afford due to the high costs of legal proceedings.

How does Czech law view class actions?

Class (collective) actions are intended to provide a group of consumers with a tool by which they can effectively combine their claims into a single legal proceeding, resulting in one judgment from the court. Up until recently, if a larger group of consumers was affected by an entrepreneur’s unlawful activity, the courts would hear each case separately. Dishonest entrepreneurs were able to exploit their stronger position, expecting consumers not to pursue claims of lesser financial value. Collective proceedings are designed to streamline court proceedings, reduce costs for both consumers and defendants and provide consistent rulings in cases with similar facts.

Before the new Act was implemented, Czech legislation did not regulate the collective protection of individual rights in collective proceedings. Although certain aspects were addressed in specific laws, there was no comprehensive regulation. Elements of collective protection were present in what was known as the collective protection of rights.¹ This extended the effects of the legal force of a decision in certain cases to individuals other than the parties to the proceedings, provided they had the same claims against the defendant arising from the same act or condition.

What claims will consumers be able to pursue collectively?

Collective proceedings will address disputes between consumers and entrepreneurs regarding the rights or legitimate interests of consumers. These claims must have a similar factual and legal basis, meaning they are either the same or so similar that it is efficient to hear them together. There are no restrictions on the type or nature of the claim. Consumers may seek:

Payment of a sum of money, provision of other substitutable consideration, repair or replacement of goods, a price reduction or withdrawal from the contract, etc.
An order for the entrepreneur to refrain from unlawful conduct
A determination of whether or not there is a legal relationship or right

Only consumers’ claims arising after 24 November 2020 can be pursued in collective proceedings. Regarding ongoing proceedings, individual proceedings that were initiated before 25 June 2023 will be completed under the previous legislation

Who can file a class action and how?

Class actions cannot be brought by the affected consumers themselves. Only nonprofit organizations, with a long history of consumer protection, that are registered with the Ministry of Industry and Trade or European Commission can file class actions. These organizations must also be represented by an associate in the proceedings. In the first instance, the Municipal Court in Prague will have exclusive jurisdiction over collective proceedings in the Czech Republic.

The Class Actions Act follows an opt-in approach; this means consumers must actively register their claims. It defines “consumers” as natural persons acting outside the scope of their business or profession. Additionally, entrepreneurs employing fewer than 10 persons and with an annual turnover or balance sheet total not exceeding CZK 50 million is also considered a consumer in this context.

A class action is admissible if at least 10 consumers register their claims. Additional consumers can join the class action by registering, and they will all be designated as “interested class members’” in the proceedings. The class members themselves are not parties to the proceedings and have only limited rights within them. (For example, they may withdraw their registration, comment on the subject matter or conduct of the proceedings; they have a right to be informed, to object to a proposed settlement, amendment or withdrawal of a class action, or to comment on an appeal).

What is the course of a collective proceedings?

Compared to ordinary civil proceedings, collective proceedings are more complex. They involve two stages:

Determining the admissibility of the class action
Examining the merits of the case.

Once a group of at least 10 members with similar claims is assembled, a nonprofit organization can assume the role of plaintiff and file the class action.

The filing must meet legal requirements; it must include a statement that it is a class action, with all the prerequisites for class membership; it must also include a detailed description of what the plaintiff is seeking on behalf of the class members and an indication whether the plaintiff is seeking fees. At this stage, the plaintiff is not required to provide the consent (opt-in) of 10 specific individuals. The court is merely considering whether there is a potentially larger class of persons affected by the conduct alleged in the class action.

Consumers may register for the collective proceedings beginning from the filing of the class action until the registration period expires. The court sets the registration period in the resolution on admissibility of the class action, which should last between two to four months from the publication of the resolution in the register of class actions. The registration must be submitted using the prescribed form, available on www.justice.cz². By registering, the consumer becomes an interested class member and thus acquires the procedural rights associated with this status in the collective proceedings. Registration in a class action proceeding prevents a class member from asserting the same right in another legal proceeding.

Once the collective proceedings have commenced, the court will first assess the admissibility of the class action. If it is admitted, the court issues a resolution on the admissibility of the class action. If, on the other hand, the conditions are not met, the collective proceedings must be discontinued, and the individuals will be free to file claims in individual proceedings. Both parties to the proceedings (i.e., the nonprofit representing the class members and the defendant, but not the class members) can appeal the court’s resolution.

Collective proceedings on the merits begin on the date the resolution on admissibility of the class action is published in the register of collective proceedings. With some exceptions, the continuation of the collective proceedings is similar to ordinary civil proceedings, i.e., the court assesses the claims and decides on the class action, after which the parties may appeal.

What costs are associated with participating in collective proceedings?

There are no costs or fees for consumers to join the proceedings, even if the class action is unsuccessful. The costs of a class action are generally covered by the parties to the action—the nonprofit organization as the plaintiff, or the entrepreneur as defendant. However, if the class action is successful, the plaintiff will be entitled to a fee of up to 16 percent of the amount awarded by the court to the consumers or, in the case of non-monetary benefits, a lump-sum fee of up to CZK 2.5 million (approximately €100,000).

Where can the current collective proceedings be found?

The Class Actions Act establishes a register of collective proceedings³ where essential documents from collective proceedings will be published. This register includes a list of individual collective proceedings in which the admissibility of a class action has been decided. The data and documents published in the register are publicly accessible.