On March 28 this year, amendments to the Consumer Rights Protection Law and amendments to the Civil Procedure Law introducing a new, efficient and effective procedural mechanism for collective consumer actions in Latvia were approved at the meeting the Cabinet of Ministers. Collective action regulation will ensure a high level of consumer protection and facilitate access to justice for consumers in order to obtain compensation for harm caused by a breach of consumer rights, as often consumers choose not to bring individual actions to court because it is expensive, complex, time consuming and the consumer is often in an unequal position compared to the trader and the resources available to the trader. Such regulation will increase consumer confidence in the internal market, increase consumers’ ability to exercise their rights, promote fair competition and create a level playing field for economic operators operating in the internal market.
Globalisation and digitisation have increased the likelihood that the same breach by the manufacturer, seller or service provider may harm a large number of consumers. A collective action means that consumers who have suffered harm as a result of a breach will not have to bring individual actions before the court, but on behalf of consumers the collective action will be brought by the qualified institution – a consumer association which complies with the requirements laid down in the law and to whom the Consumer Rights Protection Centre (CRPC) has granted the status of a qualified institution.
Qualified institutions in Latvia will be able to be any of the associations referred to in Section 22 of the Consumer Rights Protection Law (hereinafter referred to as CRPL), other associations, if one of the objectives of their activities is to protect the interests of consumers, including those consisting of members from more than one European Union Member State and who wish to acquire the status of a qualified institution. To obtain the status of such a qualified institution, the association will have to submit an application to the CRPC requesting to grant the status of a qualified institution permanently or for the bringing of a specific collective action of consumers, certifying compliance with all the criteria specified by CRPC. Compliance with the set criteria will demonstrate that the association is capable and has the resources to represent the collective interests of consumers. The list of qualified institutions of Latvia will be published on the website of CRPC and updated on a regular basis.
It is important to emphasise that the CRPC is already monitoring the collective interests of consumers according to its competence. When assessing an identified breach of consumer rights which may cause, causes or has already caused harm to the collective interests of consumers, its nature and influence, as well as other relevant circumstances, the CRPC is entitled to take several actions, including, initiating a written commitment, prohibiting the breach, taking a decision on temporary regulation, etc. However, to ensure that the harm caused to consumers as a result of the breach is remedied is as important as preventing the breach. The current regulation provides for the CRPC’s right to find and stop the breach, but do not provide for consumers to be compensated for the damage – consumers must bring an individual action before the courts to be compensated.
The draft laws ensure that the institution qualified for consumer protection has the opportunity both to apply to the supervisory and control authority for the prevention of breaches and the right to bring a collective consumer action before the court. A consumer collective action may be brought before a court against a prohibition measure (establishment and cessation of a breach) and for the purposes of legal protection measures (compensation, repair, exchange, price reduction, termination of a contract, etc.). In the event of an existing decision of the CRPC to establish a breach of the collective interests of consumers, a collective action may be brought only for the purposes of legal protection. Thus, in one case, the court will find and bring to an end the breach and will compensate consumers who have applied for collective action for the harm suffered by them, and in the other case, on the basis of a breach of the collective interests of consumers which has already been identified, will compensate consumers who have applied for collective action for the harm suffered by them.
Collective actions will be available for breaches in a wide range of sectors, including, for example, financial services, data protection, travel and tourism, energy or telecommunications, as far as consumer protection is concerned.
The mechanism introduced in Latvia requires consumers to express their will to join the collective action. The qualified institution will inform consumers about the possibility of applying for a collective action by informing them in an appropriate means of communication to reach the maximum number of consumers affected by the breach. Consumers who, for various reasons, have not been able to apply initially will be given the opportunity to re-apply for a collective action at the time the action is brought before the court. When applying for a collective action, the consumer must give consent to the qualified institution to represent the consumer, state their action and provide the documents supporting the action. If the qualified institution determines that the consumer’s application does not conform to the specified requirements, the consumer is informed regarding deficiencies and a time period for their rectification is determined. If the deficiencies are not rectified within the specified time period, the consumer is informed that participation in the collective action of consumers is refused.
After compiling consumer applications, the qualified institution applies to the merchant for compensation for the harm caused to consumers. The merchant is given a time period of at least 14 days within which it may evaluate the application of the qualified institution and fulfil the requirement in full or offer to enter into an agreement. If the parties fail to reach an agreement, the qualified institution brings the matter before the court.
The qualified institution will be able to apply to the court if the following conditions are met:
1) there will be at least five consumers in the collective action of consumers;
2) the action of consumers will be against the same defendant or defendants;
3) the actions of consumers will be based on the same or similar factual and legal circumstances.
Collective actions are a new category of cases for examination which a different procedural mechanism is envisaged. The Civil Procedure Law is therefore supplemented by a new chapter 30.9, which provides for exceptions from the general rules to be taken into account when dealing with cases arising from collective actions of consumers.
In order to ensure that the costs of litigation related to collective actions of consumers do not prevent qualified institutions from effectively exercising their rights, the draft law provides that qualified institutions are exempted from paying court fees. Such an action is introduced in view of the fact that consumer collective actions are brought in the public interest, that is to say, they protect the collective interests of consumers and that the activities of qualified institutions are non-profit-making.
Amendments to the Consumer Rights Protection Law and amendments to the Civil Procedure Law can be studied in detail on the Legislation Portal. Amendments to both laws are yet to be approved by the Saeima. Amendments to the laws are designed to ensure transposition into national law of Directive (EU) 2020/1828 of the European Parliament and of the Council of 25 November 2020 on representative actions for the protection of the collective interests of consumers and repealing Directive 2009/22/EC (hereinafter referred to as Directive 2020/1828).
The aim of Directive 2020/1828 is to contribute to the functioning of the EU internal market and to achieve a high level of consumer protection. The requirements of this Directive are in line with the European Union’s objective of ensuring a high level of protection for consumers against risks and threats to their safety and economic interests. It is important to identify and prevent a breach that has caused, causes or is likely to cause harm to the collective interests of consumers, so that it does not harm an even wider range of consumers. However, to ensure that the harm caused to consumers as a result of the breach is remedied is as important as preventing the breach. The collective action regulation will provide an effective mechanism both to prevent the breach and to remedy the damage caused.