Class Actions in Spain—An EU Proposal That Could Imply Relevant Changes
The Situation: Spain currently has a system that allows the filing of collective actions but it has not been employed frequently to date, and most consumer-related issues are still litigated on an individual basis.
Looking Ahead: A broadening of the entities that are allowed to bring collective actions and a clarification of the applicable legal regime could increase the filing of collective actions in Spain in the future.
Spain does not have specific legislation governing class actions but it does have provisions, essentially in the law for the defense of consumers and the civil procedure law, that allow the filing of collective actions under certain circumstances. These collective actions are intended to stop illegal practices and to compensate aggrieved parties with damages.
Collective Actions Procedure in Spain
Legal standing. Focusing on damages actions, legal standing depends on whether those affected by the harmful event are a group of consumers who are determined or may be easily determined (what the legislation calls collective interests); or are undetermined or it is very difficult to identify them (what the legislation calls diffuse interests).
Claims related to the protection of collective interests can be brought by a group representing the majority of affected consumers; by consumer associations; or by other legally incorporated entities that have as their purpose the defense of the relevant collective interest. However, in cases of diffuse interests, only representative consumer associations (i.e., those that are members of the State Consumers Council) can bring the relevant collective actions.
Affected individual consumers can also join the proceedings. In actions for collective interests, these consumers can join at any stage (participating only in the procedural stages that have not previously concluded). In those proceedings related to diffuse interests, individual consumers may only join at the beginning of the proceedings. However, in diffuse interests cases, to allow the joining of individual consumers, the court will publish the admission of the claim in the media and suspend the proceedings for up to two months.
Judgments. When collective actions are brought by consumer associations, the judgment upholding the claim shall individually determine the consumers who can benefit from the judgment; or, if not possible, the requirements needed to ask, or benefit from, the enforcement of the judgment.
Moreover, if a specific activity or behavior is declared illicit in a collective action, the judgment shall determine whether that declaration will have procedural effects beyond those who have been parties to the corresponding proceeding.
If individual consumers have been a party to the proceedings, the judgment shall expressly rule on their claims.
While this consumer collective action system was intended to enhance the protection of consumers and allow the filing of actions that would not be of interest for individuals, it has not succeeded in practice. There are no statistics available, but during the last years there have been several cases of mass litigation (most regarding financial products) that have been handled through individual proceedings, which strongly suggests that the introduction of collective actions has been failing. In fact, this has led to an overburden of work in some courts.
Relevant Changes That Would Be Needed in the Spanish Legislation
In April 2018, the EU Commission adopted a proposal for a directive on representative actions for the protection of collective interests of consumers ("Proposed Directive"). If this proposal is adopted, it could result in some significant changes in the current Spanish legislation. Some of them include:
Legal standing. The possible claimants in diffuse interest actions would no longer be limited to consumer associations, but would rather be the broader category of "qualified entities" foreseen in the Proposed Directive (i.e., Member States will be able to designate as such any entity properly constituted in a Member State that has a legitimate interest in ensuring compliance with the provisions covered by the Proposed Directive and that has non-profit making character).
Possibility to dedicate amounts obtained to a public purpose. Under the Proposed Directive, if consumers have suffered a small loss and it would be disproportionate to distribute the redress to them (e.g., because it is too onerous or impracticable), the amount obtained in the judgment would have to be directed to a public purpose serving the collective interests of consumers. This is not the case under current Spanish law.
Rules on funding. Qualified entities would have to declare how they fund their activity in general and also the source of the funds for the specific action. They would also need to show that they have sufficient financial resources to represent the best interests of the consumers concerned and meet the eventual adverse costs. Currently, there are no provisions that require claimants to disclose third-party funding or justify the sufficiency of their resources to litigate.
Settlements and information of outcome of cases. The Proposed Directive would grant courts the ability to review the legality and fairness of any settlement, a power they do not currently have. It would also oblige the infringing entity to inform the affected consumers of judgments and approved settlements in all cases (this is only an option now).
Two Key Takeaways
- Spanish regulation on collective actions has not succeeded in getting consumer related cases to be decided on a collective basis as opposed to an individual one.
- The Proposed Directive would introduce changes that could impact how actions for collective and diffuse interests are litigated in Spain. In particular, giving access to additional claimants in cases of diffuse interests (qualified entities that are not consumer associations) could result in an increase of these type of actions.
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