Turning point – Italy to enact EU class action framework

The Draft Bill heralds much-needed reforms to group litigation for consumers in Italy but will a workable system emerge?

The Italian Government has recently approved the draft legislative decree (Draft Bill) for the translation into domestic law of the European Union Directive (EU) 2020/1828 of 25 November 2020 on representative actions for the protection of collective interests (EU Directive).

The Draft Bill represents another step towards the strengthening of Italy's collective action regime. The bill will amend the Italian Consumer Code to allow qualified entities included in the special list set out by the Ministry of Business and Made in Italy to take representative actions to protect the collective interests of consumers. This will be the case regardless of the existence of a specific mandate from all the individual interested consumers. 

The Draft Bill is currently subject to review by the Italian Parliament with the entry into force expected on 25 June 2023, six months after the scheduled deadline of 25 December 2022 to enact the EU Directive.

The current framework

The Draft Bill represents a substantial step for Italy, which has limited experience in the field of collective actions for consumers' protection and class actions in general. Italy first tried to provide protection for consumers in 2005 with the introduction of the Italian Consumer Code. This was enhanced later in 2019 with the Class Action Reform that amended the Italian Civil Procedure Code (CCP). Through these reforms the Italian legislature ushered in the ability for organisations and associations registered in a special list of the Ministry of Justice to bring class actions to protect the rights of comparable groups of individuals.

The Class Action Reform brought significant modernisation to the previous restricted mechanism by broadening the scope of application beyond the consumer world. However, the 2019 system has not achieved great adoption yet due to the complexity of its rules, the high costs incurred by claimants and the lack of adequate incentives for law firms to take on such group claims.

The new representative action framework and its key aspects

The Draft Bill is touted as boosting consumer confidence in the EU single market and ensuring effective and uniform protection of rights while avoiding distortions of competition, as well as filling gaps left by previous regulation. 

Unlike the existing class action mechanism, which aims at protecting the homogeneous individual rights of class members, the new representative action introduced in the Italian Consumer Code aims at protecting the collective interests of consumers.

In particular, in accordance with the EU directive, the Draft Bill defines as "collective interests" those arising from violations of EU regulations and directives. These include:

• liability for defective products and general product safety;
• unfair terms in consumer contracts;
• air carrier liability in the carriage of passengers and their luggage;
• consumer protection in the indication of the prices of products offered to consumers;
• breaches of the E-Commerce Directive; and
• violation of the Community Code relating to medicinal products for human use, the Electronic Communications Code and the GDPR.

Therefore, the new regulation could be used to challenge violation of key laws which currently play a pivotal role in protecting consumer interests at EU level.

Another important aspect of the new representative action concerns the legal standing, which would belong exclusively to the qualified entities, regardless of the existence of a mandate from each individual which would be represented. As regards the right to commence an action, the Draft Bill allows claims not only against companies and entities operating public services or utilities, as it is for the class action, but against any natural or legal person, public or private. This includes if the legal person is acting through another entity for commercial purposes.

What is new is that qualified entities from other EU Member States that meet the requirements there and are listed in the new European register of consumer representative actions may also bring a group claim for payment in Italy. Likewise, the qualified entities from Italy may act abroad through cross-border representative actions. The question that arises is if this aspect will allow claimants to choose the jurisdiction in which to bring the action.

In line with the EU Directive, the Draft Bill draws a distinction between injunctive representative actions and those seeking redress for suffered prejudice, providing that they can be brought jointly. As to injunctive actions, of particular relevance is the fact that the claimant is not required to prove negligence or wilful misconduct of the defendant. The former is not even asked to prove actual losses or damages suffered by individual consumers. This type of actions will be regulated by the rules on class actions already provided in the CCP.

Finally, the Draft Bill also provides that, in the event the representative action would be rejected by the competent court, the individual consumer shall not be ordered to pay the costs of the proceedings to the defendant, except in cases of bad faith or gross negligence.

We will need to wait for the final bill and actual implementation to draw firm conclusions. However, it is already clear that the new system will bring major changes in the Italian group action framework while also presenting new dynamics and risks for consumer-facing companies. The biggest question mark is whether the decision to create a separate new system, instead of amending Italy's current class action regulation, will deliver tangible results rather than simply create a regulatory tangle.

At the least, the long-promised advent of civil group litigation in Europe has taken another notable step forward.