Luxembourg has adopted the EU’s class action directive, which allows victims of consumer fraud or malpractice to seek collective redress, following a vote in parliament on Thursday.
The new law introduces a collective redress procedure in consumer law, designed to guarantee more effective access to justice when a professional’s failings cause mass damage.
Inspired by the French and Belgian models, the law will enable groups of injured parties to obtain compensation or to put a stop to, or even prohibit, unlawful practices.
In practical terms, qualified entities – approved associations or regulatory authorities – will now be able to take legal action on behalf of several consumers who are victims of the same misconduct, whether by professionals established in Luxembourg or active on its market.
These entities will be able to take national or cross-border action, including in other EU member states. They will also have to inform the public of the initiation, progress and results of these actions, in particular via their website, in order to ensure greater transparency for the process.
The law on class actions remains a work in progress
The key role of mediation
The procedure takes place in several stages. First, a court will rule on the admissibility of the collective action, to rule out any unfounded, fanciful or abusive claims.
If the claim is deemed admissible, a mediation phase begins, lasting a maximum of six months. This mediation can be conducted by the Service national du Médiateur de la consommation (National service of the Mediator of Consumption) and is free of charge, although the parties are responsible for their own legal and investigative costs, with no financial support from the state.
If mediation fails, the case is referred back to the court, which then rules on the company’s liability in accordance with standard procedural rules. If the professional’s liability is recognised, the court orders publicity measures to inform consumers likely to belong to the group, specifying the period they have to join and obtain compensation.
The execution of approved mediation agreements or judgements against the professional in question is entrusted to a liquidator, whose costs are borne by the company.
In line with Luxembourg law
Once all consumers have been compensated, the court closes the proceedings. If any cases remain unresolved, they will be referred to the Luxembourg District Court for a ruling on the remaining compensation claims.
This new procedure is in line with existing Luxembourg law. It creates neither new rights for consumers nor additional obligations for professionals.
On the other hand, it introduces a single, coherent procedural framework that will make it possible to obtain, more effectively, measures of cessation or reparation in the event of collective damage.
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Luxembourg late on deadlines
Luxembourg has been slow to introduce collective redress. Its German, Belgian and French neighbours introduced similar procedures between 2005 and 2014, while the European Commission had already invited member states to take up the issue back in 2013.
However, it was not until 2018 and the presentation of a proposal for a binding European directive that the economy ministry launched a national debate, leading to the introduction of a bill in 2020.
But it took another five years of discussions to get it passed, well beyond the European deadlines of August 2023.
The initial text underwent a number of changes, particularly after the CSV-DP coalition came to power at the end of 2023 and Martine Hansen was appointed minister for consumer protection.
She set herself the task of tightening up the text in order to remove any provisions that went beyond European requirements. In keeping with an approach advocated by business circles, the government wanted to avoid imposing additional constraints on companies and better protect professionals from the risks of collective litigation.
Half-hearted welcome from consumers’ union
The lobby group for consumers in Luxembourg, the Union luxembourgeoise des consommateurs (ULC), said it regretted the watering down of the scope of the final law compared to the initial draft, as well as the removal of a proposal for an out-of-court settlement procedure that was to have been financed by the state.
However, the ULC said that overall it welcomes the adoption of this new type of recourse, which strengthens consumers’ power to take action, saves time and resources, and facilitates compensation for victims.
However, it warned that “the introduction of class actions in our country will not lead to a flurry of proceedings, any more than in neighbouring countries, some of which, such as Belgium and France, have had such procedures in place since 2014”.
(This article was originally published by Virgule. Translated using AI, with editing and adaptation by John Monaghan.)
