Luxembourg paves way for class action lawsuits

Introduction

The Ministry of Consumer Protection, anticipating the adoption of an EU directive on representative actions for the protection of the collective interests of consumers, has tabled a bill introducing the right of class action into the legislative arsenal in the Luxembourg parliament. 

In the wake of widely publicised debates regarding consumer rights in recent years, such as the high-profile automobile emissions irregularities affair, the proposed bill’s stated objective is to allow for efficient access to justice in cases where the failures or illicit practices of a business cause injury to multiple consumers.

What is the scope of a class action lawsuit as proposed by the bill of law?

The possibility of a class action lawsuit may be available in certain cases where the individual interests of several consumers in a similar or identical situation have been harmed and those consumers have suffered injury caused by a (potential) breach of statutory or contractual obligations by a same business (or “professional”, according to the bill’s nomenclature). 

Professionals who are supervised by the Commission de Surveillance du Secteur Financier (CSSF) or the Commissariat aux Assurances (CAA) are excluded, except in case of breaches of their legal obligations relating to distance contracts in regards to financial services (including insurance contracts), consumer credit agreements and real estate credit agreements.

Overview of procedure

The process of the class action mechanism, as proposed in the current version of the bill, can be divided into three distinct phases.

A class action lawsuit will first be judged on its admissibility by the court in order to weed out frivolous and abusive lawsuits. Class action lawsuits are only available if they are deemed more “efficient” than regular lawsuits. An out-of-court settlement process is available to the parties, although any settlement remains subject to court certification. In the absence of such a settlement, the court will decide on the merits of the case and rule on the defendant’s liability with a view to repairing any injury caused to the class members, or impose an injunction with a view to the cessation or prohibition of the defendant’s behaviour, or both. Any judgment on the defendant’s liability will serve as a “test case” applicable to all other identical or similar cases.

In a second phase, upon judgment, the defendant must inform and indemnify the class members. The procedure is subject to oversight by a court-appointed liquidator and a supervising judge.

The liquidator will, in a third and final phase, submit a report to the supervising judge who will evaluate whether or not all relevant consumers have been properly indemnified and either close the class action procedure or otherwise re-apply to the court to ensure the effective indemnification of any consumers with outstanding claims.

In certain cases, a simplified procedure can be applied by the court instead.

Who can file a class action lawsuit?

Any of the following claimants – subject to not having a conflict of interest – may file a class action lawsuit:

• Any consumer who is part of a class of at least two consumers who have individually suffered harm as a result of infringements covered by the bill
• Any consumer protection association authorised in accordance with Article L.313-1 of the Consumer Code
• Any sectoral regulatory entity (e.g. CSSF, ILR or ILNAS, etc.)
• Any non-profit association (association sans but lucratif) whose purpose as set out in its articles of association includes the defence of the interests that have been infringed
• Any qualified entity designated by a Member State of the EU or of the EEA to act in representation for injunctive and compensatory collective redress concerning violations of rights granted under EU law

Where private third parties provide litigation funding, they are not allowed to influence procedural decisions of the claimant, nor is such litigation funding allowed where the professional is a competitor of, or dependant on, the financing party.