European Class Action – Now Also in Force in Austria

With some delay, the EU Directive 2020/1828 was implemented in Austria through the Representative Actions Directive Implementation Amendment (VRUN), which came into force on July 18, 2024. The goal is to put an end to unlawful domestic or cross-border business practices that threaten or harm the interests of numerous consumers and to provide consumers with remedies in the form of compensation. This is achieved through the introduction of the representative action (known as the “European Class Action”).

What is a Representative Action?

The representative action is not a class action as known from the Anglo-American legal system. Rather, it can only be initiated by qualified entities and exclusively for the protection of consumers' collective interests. Still, legal claims can be asserted individually, in the form of mass actions, or through the so-called "Austrian-style collective action," which allows the transfer of legal claims to a person for joint pursuit. The collective actions already existing under Austrian law, such as those under §§ 28 KSchG and § 14 UWG, remain unaffected by the newly introduced European representative action.

Two types of actions have been newly introduced: (i) representative action for injunction and (ii) representative action for redress:

(i) Qualified entities are authorized to take legal action against violations by companies that affect or threaten to affect collective interests of consumers with an action for injunction (cessation or prohibition) (“representative action for injunction”). However, unlike in other European member states, the authorization to file a lawsuit covers any legal violations that at least threaten collective interests of consumers, not just breaches of EU law. However, isolated or occasional offences should not be covered.

(ii) If, in addition to the (threat of) impairment of collective consumer interests, claims for redress have already arisen for specific consumers, which were disputed out of court, these claims can be asserted through a claim for payment (“representative action for redress”). The prerequisite for this is that at least 50 such claims exist and share a common core.

A core element of the representative action is the newly created option to collectively file an interim application for a declaratory judgment (already anchored in Austrian law) in the redress procedure. This allows for the determination of the existence or non-existence of a right or legal relationship as a preliminary question, with binding effect for all consumers involved in the procedure.

What Does the New Representative Action Procedure Look Like?

Representative Action for Injunction

The procedure for a representative action for injunction basically follows the same process as previous collective actions in Austria. The prerequisite for the existence of an injunction claim is the risk of repetition. The lawsuit can be averted, as now explicitly stated in the law, if the company, after being formally warned by a qualified entity, provides a cease-and-desist declaration secured by an appropriate contractual penalty within two weeks.

New is that the claim must already include sufficient information about the consumers affected by the asserted claim. The filing of the lawsuit then suspends the statute of limitations for all affected consumers until the procedural decision has become final. After that, consumers have a period of (at least) six months to assert their claim through a lawsuit or by joining a redress procedure.

Representative Action for Redress

The redress claim must include a specific request for redress from at least 50 consumers based on essentially similar circumstances against the same company. Qualified entities can state in the claim that other consumers can join the redress procedure and specify the exact criteria for doing so. A consumer can join up to three months after the publication of the decision to conduct a representative action procedure.

The representative action procedure for redress has been newly introduced and is divided into three procedural stages:

1. First stage: The court should decide by order whether all the prerequisites for a representative action procedure for redress are met.
2. Second stage: The court can then decide on possible interim motions for declaratory judgment and hear the issues underlying this interim declaratory motion (and all individual claims).
3. Third stage: Finally, the court should decide individually on each claim from consumers – possibly based on the decision on an interim declaratory motion.

To make the procedure more efficient, the requirements for submissions and evidence should be "relaxed" to the extent that claims in the redress action only need to be substantiated as far as those facts and evidence are included that are accessible to the qualified entity with reasonable effort and sufficiently support the plausibility of the claims.

The representative action procedure can also be concluded by a settlement. A settlement between the qualified entity and the company must be confirmed by the court to be effective and only binds those consumers who have joined the representative action procedure. This is particularly interesting because, at present, there is no explicit provision for consumers to opt out of a collective action procedure. Only if the representative action is dismissed in the first procedural stage the consumer can file an individual lawsuit within a period of three months after the dismissal decision becomes final. Until then, the limitation period for the redress claim is suspended.

Finally, the court must publish its final decisions (in the respective procedural stages) and any settlement in the Edict Archives in representative action for redress; in the case of the representative action for injunction only if there is a legitimate interest.

The Vienna Commercial Court has exclusive jurisdiction for the conduct of representative actions, regardless of the value of the dispute. Contrary contractual agreements are invalid.

Litigation Funding

Compared to other member states, the Austrian legislator chose a rather liberal approach to litigation funding. Third-party funding of a collective action is not only permissible. The qualified entity can even make consumer participation in a representative action procedure conditional on the participants signing the agreement between the qualified entity and the litigation funder. To avoid conflicts of interest, the litigation funder must not be a competitor of the defendant company or economically or legally dependent on it. Otherwise, litigation funders should not unduly influence the representative action procedure. It must be disclosed to the court, if a qualified entity uses the services of a litigation funder.

Qualified Entities

Currently, the Austrian Federal Economic Chamber and the Austrian Federal Chamber of Labor are recognized as qualified entities for both domestic and cross-border actions. The Austrian Chamber of Agriculture, the President's Conference of the Austrian Chambers of Agriculture, the Austrian Trade Union Federation, the Association for Consumer Information, and the Austrian Senior Citizens' Council are authorized to act as qualified entities domestically.

Conclusion and Outlook

The implementation of the European representative action is intended to create more efficient and faster legal protection for consumers. Whether this goal will actually be achieved with the newly introduced representative action procedures remains to be seen. The Vienna Commercial Court and the Austrian Supreme Court see no procedural simplification in the supposed "relaxation" of the requirements for submissions and evidence. In light of the explicitly introduced possibility of third-party litigation funding, a wave of collective actions is certainly expected.