Spain’s opt-out EU collective redress rules set to drive ‘abusive’ class actions, warns think tank

A bill drafted by the Spanish government to implement the EU’s Collective Redress Directive (CRD) is set to introduce more stringent rules in Spain than many other European countries and could dramatically increase the risk of companies suffering huge losses due to consumer class actions in the country, a think tank has warned.

The think tank, which is linked to Spain’s main business association, said that the proposed rules would bring the Spanish legislation on collective actions much closer to the model prevalent in the US than those in most other European countries.

Bill number 121/000016, submitted to Parliament in June, transposes into Spanish legislation the CRD, which was passed in 2020 and deals with the collective rights of consumers.

The CRD allows countries to introduce an opt-in or opt-out class action mechanism. Most EU member states, such as Denmark and France, are going for the opt-in. A notable exception is the Dutch opt-out mechanism, while Belgium has implemented a combination of opt-out and opt-in. Spain looks to be following the route set by the Dutch.

Analysis by think tank Instituto de Estudios Económicos (IEE) criticises the Spanish bill for proposing an opt-out model. This would mean that all consumers potentially impacted by a class action can benefit from a positive court verdict unless they officially opt out.

The IEE noted that the decision to use the opt-out mechanism in Spain contrasts with those of other European countries.

As a result, the new rules would increase the risk that Spanish companies become targets of “costly and loosely grounded” actions, the IEE warned.

“Furthermore, having regulation that is more unbalanced against companies in our country than those that prevail in our neighbours may put Spain in a competitive disadvantage,” the IEE added. “The bill promotes abusive and indiscriminate litigation against Spanish companies.”

“As legal costs in Spain are much lower than those found in Anglo-Saxon markets, where class actions enjoy a longer tradition, there is a risk that abusive or groundless actions will be triggered, exposing companies to an excessive and artificial level of legal pressure, and increasing operational costs and the uncertainty in their relationship with consumers,” the IEE added.

It has urged the Spanish Parliament to change the bill so that an opt-in class action model is implemented.

It also said that the bill should impose limits on the ability of third parties to finance class actions by consumer representatives. This suggests they fear the new rules could generate litigation funders, which have helped caused a spike in litigation in the US.

The CRD was scheduled to be implemented by all EU member states by 25 December 2022, with national rules applying from 25 June 2023. However, by January 2023, only three out of the 27 EU member states had properly implemented the CRD into their national legislation. But by May this year, at least nine member states had enacted national implementing legislation.