Objectives of the Class Action Law
Upon adopting the class action law, the legislator aimed to increase the economy and efficiency of judicial proceedings by allowing the combination of several separate claims from various entities with similar factual and legal bases into a single entity. Consumers, who would otherwise not be interested in pursuing the matter in court (e.g., due to the triviality of their claim), can now seek their rights more effectively through a class action.
The threat of filing a class action will also increase pressure on unscrupulous entrepreneurs who often benefited from the lack of consumer interest in legally defending themselves against unfair business practices. Introducing class actions into Czech law should lead to an economic and social stimulus, resulting in at least a partial correction of the business environment.
What is a Class (Collective) Action?
A class (collective) action is a special type of proceeding that allows disputes concerning the rights and legitimate interests of multiple persons to be heard and decided together. This group of interests includes consumers. Unlike the standard understanding of the term consumer, the class action law interprets this category more broadly, considering not only individuals acting outside the scope of their business or profession but also some business entities – specifically entrepreneurs who employ fewer than 10 people and whose annual turnover or balance sheet total does not exceed 50 million CZK.
Class proceedings are initiated based on a class action, through which the plaintiff can seek the fulfillment of an obligation (e.g., payment of a certain sum of money) or a determination of whether a legal relationship or right exists or does not exist (e.g., determining that the defendant committed unlawful conduct).
According to Section 8(1) of the law, only a designated legal entity can be the plaintiff in a class action. This legal entity acts on behalf of the registered injured consumers, must always be represented by an attorney, and operates in its name. Although individual group members (injured consumers) are not parties to the proceedings, the law grants them certain procedural rights. These include the right to comment on the subject or course of the proceedings, the right to information about the proceedings, the right to access the file, and the right to comment on the appeal.
The Municipal Court in Prague is exclusively competent to hear class actions at the first instance, tasked with ensuring uniform, economical, and efficient adjudication of collective disputes between businesses and consumers.
Opt-in Principle
Class proceedings in the Czech Republic are based on the opt-in principle (registration principle). This means that individuals asserting their claims must actively register for the class action. A special Ministry of Justice form is used for this purpose. The application must always include general requirements and factual statements and evidence proving that the group member registering for the class action meets the membership conditions.
At least 10 registered persons represented by one plaintiff are required to initiate class proceedings. If the group consists of fewer members, the court must stop the proceedings.
Examples of Class Actions
The use of class actions can be envisioned in the following sectors:
- Disputes between banks and their clients (e.g., unlawfully charged fees, unauthorized changes to contractual terms)
- Disputes between securities dealers and retail investors (e.g., unlawfully charged fees, damages caused by breach of duty to act with professional care)
- Disputes between insured persons and insurance companies (e.g., claims from insurance contracts)
- Disputes between developers and buyers (e.g., claims for hidden defects)
- Disputes between e-shop operators and customers (e.g., unfair business practices, hidden fees)
As mentioned above, all these issues can be addressed through a class action if they concern a larger number of consumers facing similar or identical problems with a single entrepreneur. A class action allows these individual cases to be combined into one court proceeding, which can be more efficient and less costly for both consumers and the judicial system.
