EU Bubble

Regular news on the EU bubble

30 January 2018 – Brussels – Doriane de Lestrange

The European Court of Justice (ECJ) ruled on 25 January that Mr. Max Schrems, an Austrian privacy activist, cannot file a class action against Facebook Ireland (the company’s European headquarters) on behalf of 25.000 other people. Instead the ECJ said that he can bring an individual action against Facebook before the Austrian Courts.

Austria’s Supreme Court had referred this matter to the ECJ after Schrems brought the case before national courts on behalf of himself and other users based in Austria, Germany and India in the spirit of initiating a class action law suit. The ECJ explained that EU law does not allow Schrems to bring such an action on behalf of others because each consumer has a specific individual contract with Facebook and must thus file a separate law suit.

Despite a disappointing decision, Max Schrems declared that “Facebook will now have to explain to a neutral court whether its business model is in line with stringent European privacy laws. This is a huge blow for them”.

The Austrian activist has pursued Facebook for the last seven years accusing them of misusing personal data and claiming that the US internet giant is not respecting European data privacy legislation, which is one of the toughest in the world. Schrems already made some noise by bringing down the EU’s “Safe Harbour” data agreement when he sued Facebook for illegally transferring personal data from Europe to the US. The ECJ then ruled that this 16 years-old agreement was not adapted anymore and it was replaced in July 2017 by the EU-US Privacy Shield agreement.

The US internet giant welcomed the ECJ decision and expressed its relief. “We were pleased to have been able to present our case to the European Court of Justice and now look forward to resolving this matter,” said Sally Aldous, a Facebook spokesperson.

Unfortunately, the European Court of Justice has missed a unique opportunity to finally enable collective redress but kicked the ball back to the legislator”, added Mr. Schrems.

Indeed, the European Commission has been under pressure to propose an EU legislation allowing collective law suits since 2015 Volkswagen emissions tests’ scandal. Consumer groups within Europe have campaigned for years for the Commission to issue a new regulation allowing EU-level class actions involving parties from different member states, arguing that it would make it easier and cheaper for consumers to sue. In a recent press release, the European Consumers Organization (ECO) declared that such a legislation would allow “consumers to team up to save costs and efforts compared to undergoing a court procedure individually”. Monique Goyens, ECO director, added that “a genuine European collective redress tool would shift the balance back in favour of the consumer”.

All of this could soon come to an end. On 26 January, the Commission published a report looking at what is done by Member States in terms of collective law suits. As announced in the Commissions’ work programme for 2018, EU Justice Commissioner Vera Jourova is expected to issue a “New Deal for Consumers” in next spring proposing a new system of collective legal proceedings. “Our aim is to have legislation in place that effectively protects consumers everywhere in the EU”, she said on a speech in last September.

The possible introduction of a European class action system will need to be monitored closely. Even if it is obviously important to protect the consumer’s right within the EU, one must pay attention to the possible ill-effects of such proceedings. As observed in the US, where this system has existed for a long time, punitive damages can sometimes lead to corporate bankruptcy. Consumers protection must not mean companies destruction. Furthermore, and from a more philosophical point of view, this system could encourage the establishment of a ‘litigation society’ in which people bring their cases before courts for the sole purpose of making money. A European class action system should thus take into account our legal system’s judicial culture on order not to go the wrong way.

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