Consultation on Towards a Coherent European Approach on Collective Redress / SEC (2011) 173 final

European Commission

With reference to the consultation Federation of Finnish Enterprises states the following:

The Federation of Finnish Enterprises does not see the categorical need for creating a redress mechanism on European level at this moment. As stated in Commission´s consultation (SEC (2011) 173 final), the existing national mechanisms in relation to compensatory redress vary widely throughout the EU. Legislation in this area is mostly relatively recent and fragmented: there are no two national systems alike. There has not been any evidence of the efficiency of these systems nor has it been considered whether they might be transferable to other legal orders. In our view the advantages and disadvantages of each system should first be thoroughly scrutinised and then calculated whether there is a need for European regulation on the subject. While doing this, risks of abusive use of collective redress mechanism should be borne in mind.

If, however, this kind of regulation is to be progressed, the role and position of SMEs should be thoroughly assessed and taken into account that SMEs often face similar and even greater challenges than consumers when it comes to the need of legal protection and access to justice.

Because of the potential costs of litigation SMEs can often be reluctant to initiate private lawsuits even against clearly unlawful practices. This is especially true when the individual loss is small. Also the protracted duration of a judicial process will have a bigger influence on entrepreneurship in a small company than in a large firm with their own legal department. In comparison with consumers the biggest differences in pleading a case are often the risks of the expenses that SMEs will have to bear. This is also true within the so called alternative dispute resolution (ADR) schemes.

While it seems clear that – although most likely in relatively few cases – SMEs could potentially benefit from rightly regulated collective redress -mechanism, it should also be taken care of that the mechanism could not be used in an abusive manner. For this reason there should be an authority subject to official liability that would rule whether an individual case would be suitable for collective redress. In Finland such an authority already exists for consumers: in Act on Class Actions (444/2007) it is enacted that The Consumer Ombudsman, as the plaintiff, shall have exclusive standing to bring a class action and to exercise the right of a party to the case to be heard in court. If Commission plans to proceed with the matter of collective redress it should analyse and assess the potential of equivalent arrangement also for SMEs taking into account that also the European Parliament has taken notice of the need of a clearly identifiable national authority for SMEs especially in case of misleading advertising (P6-TA(2008)0608).

Added to this, there are some basic principles that should be taken into account if collective redress -mechanism is considered on European level:

Firstly, this mechanism should be limited to be used under rather strict conditions only. The hearing of the case as a class action should be expedient in view of – for example – the size of the class, the subject matter of the claims presented in it and the proof offered in it.

Secondly, there is no categorical need for the collective redress -mechanism to be always and automatically free of charge for those who take part in it.

Thirdly, the typically close connection of collective redress -mechanism to ADR-schemes should be paid attention to. This is especially true in relation to SMEs whose access to alternative dispute resolution schemes can often be more difficult or more expensive than it is when consumers are taking the initiative. Hence many of the goals of collective redress -consultation could also be reached by improving the existing ADR-schemes.

In conclusion we would like to point out that in COM(2008) 394 final (A “Small Business Act” for Europe) it is stressed that one of the goals of the EU´s policy needs to be making the EU a world-class environment for SMEs. In our view this includes, among many other things, ensuring SMEs access to justice when there is a well-grounded need for it.

Moreover, in COM(2011) 78 final (Review of the ”Small Business Act” for Europe) it is stated that the Commission will carry out an in depth analysis of the unfair commercial practices and contractual clauses in the business to business environment in the Single Market and table a legislative proposal if needed in order to protect businesses against unfair contractual terms.

Thus, if a mechanism of collective redress is to be further evolved, the Commission should bear in mind the goals set in the SBA and the SMEs need for protection against unfair commercial practices.

Federation of Finnish Enterprises

Jussi Järventaus
Managing Director

Lauri Rautio
Legal Adviser