1. Review of the VRUN until 27 May 2024
For decades, other sectors in the mass customer business have been regularly struggling with issues of transparency and objectivity of their general terms and conditions, and/or the question as to whether GTCs could hold surprises for consumers; by contrast, the domestic energy sector has only lately started to struggle, i.a. with legally secure options for pricing vis-à-vis consumers.
The somewhat cumbersome acronym VRUN (Verbandsklagen-Richtlinie-Umsetzungs-Novelle, i.e. Amendment to implement the Directive on representative actions) stands for what is now (finally) a legislative proposal to implement Directive 2020/1828 of 25 November 2020 on representative actions for the protection of the collective interests of consumers and repealing Directive 2009/22/EC. Austria has been delayed in implementation for some time; as a consequence, and in the context of an energy law dispute, the (first- instance and not yet unappealable) assumption has even arisen that the Directive could be directly applicable (Regional Court of Klagenfurt, 20 March 2024, 77 Cg 49/23m).
The Ministry of Justice sent out the VRUN for review as a ministerial draft (333/ME Legislative Period XXVII) along with
- the Federal Act on Qualified Entities for Representative Actions (Qualified Entities Act - QEG) and
- Amendments to the Code of Civil Procedure, the Consumer Protection Act, the Court Fees Act and the Lawyers' Fees Act.
The review period ends on 27 May 2024. Comments submitted until then can be viewed at https://www.parlament.gv.at/gegenstand/XXVII/ME/333?selectedStage=101. According to reports, the aim is to submit a government bill and adopt it before the summer of 2024; the regulations should enter into force on the day following the promulgation.
According to this timetable, which has now become rather ambitious, the first (genuine) representative actions could be filed in this country as early as this year; they could possibly trigger new waves of lawsuits against companies doing mass customer business which are notoriously affected quite frequently - most recently this also included enterprises in the energy sector. Thus, it makes sense to get an overview of the new types of representative actions and their potential effects in good time:
2. Who has standing to bring an action in the future?
In particular, the Qualified Entities Act (QEG) governs the recognition, supervision and powers of qualified entities authorised to bring (cross-border and domestic) representative actions. The Federal Cartel Prosecutor is to be responsible for recognition and supervision.
Firstly, the associations already authorised under Section 29 (1) of the Consumer Protection Act (KSchG) are to be legally recognised qualified entities for the assertion of domestic representative actions in accordance with the provisions of the QEG. Moreover, the Austrian Federal Economic Chamber and the Federal Chamber of Labour should be entitled to bring cross-border representative actions.
Furthermore, any legal entity established under Austrian law should be suited for recognition by the Federal Cartel Prosecutor as a qualified entity for cross-border representative actions upon application, provided that it fulfils the following requirements:
- it has already been publicly active in the protection of consumer interests for 12 months prior to the application and it can be derived from the purpose stated in the constitution of the organisation that it has a legitimate interest in the protection of consumer interests,
- it is a non-profit organisation, independent and not insolvent and it is not under the control of persons - in particular entrepreneurs - with an economic interest in bringing representative actions, and
- it publishes certain information about itself in an appropriate manner, in particular on its website.
Apart from these requirements, if it also appears certain that an applicant will fulfil the tasks under its constitution effectively and appropriately in the future and that it is not funded to more than 20% by financial contributions from enterprises against no consideration, it can also be recognised as a qualified entity for domestic representative actions.
Third-party financing of representative actions is expressly permitted unless as the third-party financier is a competitor of the defendant or economically or legally dependent on it. The structuring of contracts for third-party financing is left to autonomous private arrangement.
3. What are the options available for representative action?
In the future, there will be two different types of representative action. The VRUN stipulates that the Commercial Court of Vienna has exclusive first-instance jurisdiction for both types. Diverging agreements on the place of jurisdiction are not permitted.
(a) Representative action for injunctive relief
Qualified entities may (now) file actions for injunctive relief in all matters of infringements by enterprises which impair or threaten to impair the collective interests of consumers. Moreover, the previous options for bringing an action under Sections 28 et seq. of the Consumer Protection Act (KSchG) and Section 14 of the Unfair Competition Act (UWG) remain in place; in many respects, these are similar to the new representative actions (including the possible publication of judgments provided for in the QEG).
Among other things, special or novel features can be found in the fact that, for all claims related to the subject matter of the action against the defendant, the limitation period is suspended until the unappealable completion of the proceedings once the representative action for injunctive relief has been brought on behalf of affected consumers. Thereafter, consumers still have a period of 6 months to assert their claims in court by bringing an individual action or joining a representative action for redress.
(b) Representative action for redress
It is actually a novelty that qualified entities may bring a representative action "for redress" if, at the time the action is brought, the infringement by an enterprise has already given rise to claims for redress essentially based on similar circumstances from at least 50 specific consumers. According to the explanatory notes to the ministerial draft, this minimum number is intended, among other things, to prevent companies from "torpedoing" lawsuits by satisfying the claims of individual consumers. It should be noted that such a claim must in principle be conclusive, but it is merely required to contain such facts and evidence as are accessible to the qualified entity with "reasonable effort" and as sufficiently support the "plausibility" of the claims.
The representative actions are to be broken down into 3 different stages:
- In the first stage of the proceedings, the Commercial Court of Vienna is to decide whether the requirements for a representative action for redress are met at all. The decision on pursuing a representative action will be published in the Edict Database (the database for official publications of the courts) after it has become unappealable.
- In the (potential) second stage of the proceedings, the Commercial Court of Vienna will then decide on interim motions for declaratory relief by the qualified entity or the defendant; these serve to clarify a right or legal relationship on whose existence or non-existence the outcome of the legal dispute will depend in whole or in part.
- Only in the third stage of the proceedings will the Commercial Court of Vienna finally decide on the individual claims for performance of the consumers involved.
Only those consumers who actively have joined the representative action (opt-in) should be involved in the representative action for redress. Joining is a two-stage process in which the consumer first contacts the qualified entity. If the qualified entity accepts the opt-in, it must notify the court and the defendant of the consumer's opt-in by means of written pleadings. Consumers may join during a period of up to 3 months after publication of the decision to initiate a representative action and the act of joining can not be revoked.
4. Practical effects
The organisations which previously had and still have standing to bring an action under Section 29 (1) Consumer Protection Act have made in some cases made frequent use of their right to assert claims for injunctive relief against the application of and reference to unlawful general terms and conditions; some of them, however, hardly used this right at all. (Very) often the (sometimes rigorous) reviews of GTC clauses was aimed at the mass customer business of e.g. banks, insurance companies, mobile phone companies, landlords, travel providers of all descriptions; most recently, the energy sector has increasingly been faced such actions in connection with price adjustments, contract amendments or cancellations.
Notwithstanding representative actions within the meaning of Sections 28 et seq. of the Austrian Consumer Protection Act, consumer protection organisations which have or do not have standing to bring an action have already endeavoured to (and been successful in) assert/ing consumers' claims for redress in court. This was done either through the specially developed means of a so-called "Austrian-style class action" (in which individual claims are assigned) or - as has recently i.a. been the case in actions against energy suppliers - through supporting numerous individual proceedings running in parallel. It was in particular the latter approach which sometimes put a massive burden on court resources (often district courts due to small individual amounts in dispute).
The new legislation could potentially lead to increased efficiency in the future as more proceedings can be bundled; however, it remains to be seen whether this will not be (more than) offset by the (significant) rise in the number of actions which is to be expected - in particular due to the "qualification" of new consumer protection organisations. Consumer protection organisations and defendant enterprises will also have to struggle with considerable legal uncertainties at the beginning as the legal framework is entirely new. Of course, it also remains to be seen to what extent and whether the new types of representative action will also be very different in terms of content compared to the existing options of legal protection.
As this legislative text is still a ministerial draft, it is uncertain whether the Directive on Representative Actions will actually be implemented in Austria as described above. However, we will keep you updated!
If you have any questions or other concerns about these topics or any other issues relating to energy, transformation, climate action and sustainability, the KWR Energy Teamwill behappy to assist you whenever the need arises.