France
Implementation of the European Directive on representative actions
Which national regulations transpose the Directive into national law?
Class actions were introduced in France through the “Hamon Law” (Law No. 2014-344 of 17 March 2014).
Nevertheless, their success in the country has been, in practice, quite limited. Since 2014, only 32 class actions have been initiated, and less than 20% had positive results. In addition, very few decisions were handed down on liability.. In response to this situation, a parliamentary report was published in June 2020, proposing three key recommendations:
- establishing a general framework for class actions that is not limited to a specific industry or sector;
- providing full compensation for all losses, whatever their nature;
- granting legal standing to two types of entities: (i) associations whose stated purpose aligns with the subject matter of the dispute and have been in existence for at least two years; and (ii) ad hoc associations of at least 50 natural persons, or at least 10 legal persons, with a minimum existence of two years
Subsequently, a draft bill dated 15 September 2020 was crafted to implement these recommendations.
However, it was not examined due to its submission shortly before adoption of the EU Directive on representative actions. In order to transpose this Directive in French law, a new bill was presented to the French National Assembly on 15 December 2022. Following various amendments proposed by mem-bers of the Parliament, the National Assembly endorsed the text on 8 March 2023. The text is currently under review by the French Senate and should be debated in public session on 6 and 7 February 2024.
Who is entitled to bring a representative action?
The current legal applicable provisions under French law give standing to bring a class action only to certain types of non-profit associations.
Entities eligible to initiate legal actions in France are:
- for consumers, authorised consumer protection associations (of which there are only fifteen in France);
- for other class actions, which cover public health, environmental matters, personal data, or employment discrimination, the system is complex because the conditions governing which entities can bring an action vary from one sector to another.
The new bill which was approved by the National Assembly on 8 March 2023, proposed expanding legal standing to include the following:
- any non-profit association that has been in existence for more than 2 years and whose mission aligns with the subject matter of the dispute;
- any non-profit association representing a minimum of 50 individuals facing a similar situation, or at least 5 legal entities that have been established for at least 2 years;
- any non-profit association representing at least 5 local and regional authorities;
- qualified entities eligible to initiate cross-border representative actions, as defined in Article 5 of the Directive;
- the Public Prosecutor, either as the primary party in actions seeking the cessation of infringements or as a joint party in various types of class actions.
The new bill submitted by the Law Commission on 24 January 2024 proposes expanding legal standing to include the following:
- any duly registered non-profit-making association, provided that it meets the following conditions: 1. it must provide evidence of twelve consecutive months' effective and public activity in defence of interests that have been adversely affected; 2. its statutory purpose is to defend interests that have been adversely affected; 3. it is not the subject of collective insolvency proceedings; 4. it is independent and not influenced by persons, other than those whose interests it defends, who have an economic interest in bringing a group action. To this end, it has adopted written procedures for preventing and managing conflicts of interest; 5. it shall make available to the public information on its statutory purpose, its activities, the main sources of its funding and its organisation.
- any representative trade unions, and representative trade unions of judges in various types of class actions;
- qualified entities eligible to initiate cross-border representative actions, as defined in Article 5 of the Directive;
- the Public Prosecutor, either as the primary party in actions seeking the cessation of infringements or as a joint party in various types of class actions.
In the version passed by the National Assembly on 8 March 2023, Article 1a was intended to unify and significantly broaden standing to bring a group action. The Senate Law Committee decided to reverse this extension of standing. It has therefore been decided to restrict the ability to bring a group action to approved associations.
The Senators, authors of the latest amendment, deplore this new wording, as it is likely to restrict and hamper the ability of associations to take action, which would run counter to the very purpose of this proposed law. The amendment therefore seeks to return to the wording of Article 1 bis as adopted by the National Assembly on first reading.
What can be the subject matter of a representative action?
Initially limited to consumer and competition matters, class actions were extended in 2016, and then further extended in 2018.
Group actions can be initiated in the following areas:
- consumer affairs and competition matters;
- healthcare matters;
- environmental disputes;
- protection of personal data matters;
- discrimination in the workplace;
- housing rental disputes.
However, the new bill submitted by the Senate Law Committee on 24 January 2024 being examined by the French Senate envisages a general regime that would replace the existing sector specific current rules.
Indeed, the new bill provides that:
- “A group action shall be brought by a claimant referred to in Article 1 bis on behalf of a number of natural or legal persons who are in a similar situation as a result of the same infringement or a breach of the same kind of legal or contractual obligations committed by any person acting in the course of or in connection with the exercise of his or her professional activity, by any legal person governed by public law or by any body governed by private law entrusted with the management of a public service”.
It repeals the specific group action regimes and provides for a single regime that is not limited to a particular sector.
Which individual consumers are represented in a representative action?
One of the prerequisites for initiating a class action is that, initially, a minimum of two consumers must collectively perceive that they have incurred harm due to the actions of the same professional, with no set limit on the number of consumers involved.
Under current positive law, the court is then tasked to (i) assess the eligibility of the claim, (ii) determine the liability of the business or professional, (iii) establish the criteria for compensation, (iv) define the category of users to whom the person, whose responsibility is sought, is accountable, and (v) set the conditions for connecting the claim to the broader group of affected individuals.
If the professional is found liable, publicity measures (article 849-11 of the French Code of Civil Procedure) must be initiated by the professional to enable other individuals concerned to come forward. Victims who make themselves known within the set deadline can then join the group action.
What will be the outcome of a representative action?
Under the existing French legal framework, the compensation available depends on the specific category of class action:
- In class actions pertaining to consumer rights, competition issues, and housing rental matters, compensation is limited to pecuniary losses resulting from tangible/material damages;
- In class actions related to public health, damages can only be granted for injuries resulting from physical harm experienced by health care system users;
- In class actions involving environmental law, damages encompass both physical injuries and material losses arising from environmental harm;
- In class actions dealing with discrimination, compensation can be granted for any kind of damage;
- In class actions relating to data protection, damages may be awarded for moral damage or material losses.
However contrary to the French law currently in effect, the new bill adopted by the National Assembly on 8 March 2023 being examined by the French Senate proposed the following changes:
- class actions should allow the cessation of a violation or the compensation for various types of harm, whatever their nature, suffered as a result of the breach in question;
- when the fault is determined to be deliberate and has resulted in damage to multiple individuals or entities, the defendant could be liable for a civil penalty commensurate with the severity of the misconduct and the corresponding profit obtained by the defendant;
- if the defendant is a legal entity, the civil penalty could reach a maximum of 3% of the accused company’s revenue, excluding taxes.
The bill, as submitted by the Senate Law Committee on 24 January 2024, deleted the two last additions concerning the deliberate fault and the civil penalty. However, the amendments reinstate them.
Are there particular rules for the disclosure of evidence?
No, and that will not change once the EU directive on representative action will be transposed. The common French legal rules regarding the disclosure of evidence will apply.
Is third party funding possible?
While third-party funding of these actions is not explicitly banned, consumer protection class action regulations include provisions for specific direct pay-outs, which cast doubt on the feasibility of directly distributing proceeds to a funder.
Although the new bill aims to legislate on this topic, the proposed provisions are currently the subject of debate.
The text, as adopted by the National Assembly, stated that:
- “On pain of inadmissibility, the plaintiffs mentioned in I and II of Article 1 bis who bring a group action must produce a sworn statement from their legal representatives to the effect that they are pursuing a non-profit-making aim and that the third parties who provide them with funding, unless they themselves suffer damage caused by the breach of which the defendant is accused, have no economic interest in the bringing or outcome of the action and are not competitor of the defendant”.
At its current state, the new bill states that:
- “The claimant in a group action for damages shall ensure, at all stages of the at all stages of the procedure, not to place themselves in a situation of conflict of interest and to protect the exercise of the group action they are bringing from the influence of a third party to the likely to prejudice the interests of the persons represented”.
We'll have to wait for the latest version of the bill to get an answer on this subject.
Conclusion
While the business community fears that implementation of the directive at national level will lead to conditions similar to those in the United States, it should be remembered that the American class action differs from the European representative action in that, in addition to compensatory damages, punitive damages can also be claimed.
The current applicable regime of class actions in France has been disappointing thus far. However, the initial reactions from commentators on the proposed changes to this regime brought by the new bill are mixed. Supporters of class actions welcome the advancements in the proposal, such as the universality, the broadening of actionable damages, and the expansion of standing to sue. But they also express concern about the complexity of the procedure, the uncertainty of some provisions in the text, such as the scope of the prohibition on financing by third parties with an economic interest in the action and the potential government financing.
These issues will continue to be discussed and will need to be followed closely.
Contact
Rémi Kleiman
T: +33 155 734 024 E: remikleiman@eversheds-sutherland.com
Sarah Monnerville Smith
T: +33 155 734 034 E: sarahmonnervillesmith@eversheds-sutherland.com
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