CZECH REPUBLIC Trends and Developments Contributed by: Robert Němec, Michal Sylla, Viktor Glatz and Adéla Šmahelová, PRK Partners
two oral hearings, issued a judgment within eight months. The defendant was ordered to pay a total of CZK1,608,136 (approximately EUR66,000) to 52 represented consumers, CZK175,087 (approximately EUR7,200) to the claimant as costs of the proceed- ings, CZK239,347 (approximately EUR10,000) as the claimant’s remuneration and CZK80,407 (approxi- mately EUR3,300) to the state as the court fee (since the claimant was exempt from the court fee obliga- tion).The total amount of the claimant’s remuneration was determined at 16% of the claimed amount, which represents the maximum possible percentage rate that can be awarded. Due to a lack of similarity, the proceedings were par- tially suspended with regard to four consumers. The court did not find these claims to be sufficiently similar as they concerned products that were (at least par- tially) delivered but were defective or were delivered late. Therefore, these claims were not addressed in the collective proceedings and the consumers may bring individual actions. The defendant filed an appeal, and the judgment is therefore not yet final. Obstacles to Bringing a Collective Action With the Collective Proceedings Act introducing the concept of collective redress proceedings into the Czech legal system for the first time, a question that is often being asked is whether this new legislation will actually be an effective tool for consumers to col- lectively enforce their claims, or whether it merely rep- resents formal compliance with the EU’s requirements under the Representative Actions Directive. Since the new legislation has only been in force for just over one year, it is too early to answer this question with certainty. What has been observed so far is that only one col- lective action has been filed under the new legislation, and there appears to be limited interest in registration among potential qualified entities. While this may part- ly be due to the short time since the legislation came into force, there may be other factors at play too. During the legislative process, as well as in the ongo- ing public debates, it has been suggested that most
consumer organisations, despite some of them already being registered in the “old list”, have no plans to file collective actions in the near future. The primary reasons presented by them were the unsatisfactory conditions and financial burdens following from the Collective Proceedings Act, particularly regarding the maximum amount of the claimants’ remuneration and costs of the proceedings. In collective action proceedings, qualified entities shall proceed at their own costs, which include the expens- es related to publishing information in the collective proceedings register, administering group members’ registrations, and maintaining the list of participat- ing group members. If the collective action is unsuc- cessful, the claimant shall also be ordered to pay the defendant’s costs of proceedings. Consumer organi- sations argued that such financial burden could drive them to bankruptcy. At the same time, consumer pro- tection organisations were not satisfied with the pro- posed, and eventually accepted, maximum amount of the qualified entities’ remuneration that can be agreed between the qualified entities and consumers repre- sented by them – ie, 16% of the awarded amount or CZK2,500,000 (approximately EUR100,000) if agreed as a flat rate. Therefore, Czech consumer protection organisations argued that unless the above issues are addressed differently in the Collective Proceedings Act, claim- ants will be forced to rely solely on third-party fund- ing. Such sources of funding are subject to statutory conditions and court review under the Collective Proceedings Act. Attracting third-party funding may also be challenging due to the relatively low limits of maximum remuneration that the claimant may receive from the awarded amount. Consumer organisations in the Czech Republic also criticise the requirement for claimants to be represented by an attorney in the col- lective claim proceedings, as many of these organisa- tions already employ lawyers specialising in consumer law. Moreover, all of the above-mentioned issues were extensively debated in the Parliament. One reason for the Collective Proceedings Act’s current form is to prevent claimants from viewing collective action pro- ceedings as potential investment opportunities and
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