Citizens of Montenegro will finally have a way to not only prevent further damage through collective actions, but also to obtain compensation or refunds, in cases where companies or individuals damage more than one of them. This collective redress mechanism is currently not available and would be enabled by the adoption of the Law on Collective Actions, with the aim of raising domestic consumer protection to the level of the European Union (EU) and other developed countries.
This is stated in the Draft Law on Collective Actions, which the Ministry of Economic Development has put up for public debate until June 4th.
Collective actions will be able to be filed for injunctions or compensation for damages, and would facilitate judicial protection and the exercise of rights, prevent violations of rights and reduce the overload of courts, while the adoption of this law would harmonize domestic legislation with that of the EU, which is a prerequisite for the temporary closure of Chapter 28 - Consumer and Health Protection.
In addition, the Ministry of Economic Development will have to establish a register of collective lawsuits with data on ongoing and concluded disputes, and the database will have to offer information on who is qualified to represent citizens in domestic and cross-border lawsuits.
The impact assessment of this law (RIA) states that Montenegro currently only has collective actions for imposing measures within the Consumer Protection Act (CPA), which can be used to request the cessation of illegal behavior, i.e. unfair work or misleading advertising, but also that these judgments only apply to the future behavior of the trader and that the injured parties cannot receive money based on compensation for damages, price reductions...
Lawsuits are filed by organizations, companies, associations...
In Montenegro, two class action lawsuits were filed, both initiated by the Consumer Protection Center against the Montenegrin Commercial Bank, and both found violations of consumer rights. One case related to the prohibition of charging a percentage fee for loan processing, and the other to charging a fee for early loan repayment of 0,5 percent or 1 percent, regardless of the actual costs incurred by the bank.
"Consumers, as the weaker party in a contractual relationship with traders, often give up on initiating proceedings to protect their rights, especially in situations where the value of these disputes is small and disproportionate to the costs of court proceedings under an individual lawsuit. This increases the imbalance in the relationship between traders and consumers, as it opens up space for the application of unfair business practices. Other economic entities, i.e. competitors operating in accordance with the law, are also harmed. The main objective of the law is the right of consumers to collectively pursue monetary and other compensation claims in the event of certain typical mass damages. A collective lawsuit facilitates access to judicial protection, especially in cases where the damage is so small that it would not be worthwhile for potential plaintiffs to file individual claims. The law will increase the bargaining power of plaintiffs and contribute to greater efficiency of judicial protection, as it will help avoid conducting a large number of proceedings arising from the same legal violation," the document states, emphasizing that budget revenues are expected from the collection of court fees and fines in the event of violations.
Collective actions may include a request for an injunction and/or compensation for damages, while citizens are not parties to the proceedings but are entitled to benefit from the measures adopted. The actions will be decided by Montenegrin courts, and they can be filed in domestic and cross-border cases. They can also be filed when the infringements of rights have ceased before the action for the protection of collective consumer interests was filed and while the proceedings are ongoing.
Actions for injunctions and/or damages may be brought by independent consumer protection organizations and companies and consumer organizations that meet the requirements and are registered with the Ministry. Collective actions seeking injunctions only may be brought by chambers and trade associations.
"A collective action for an injunction may be filed against an individual trader or group of traders from the same economic sector whose actions violate consumer rights, thereby violating the collective interests of consumers, against chamber and interest associations of traders who encourage such actions, or against the holder of a code of conduct that encourages the use of unfair business practices. Before filing a collective action for an injunction, the authorized person is obliged to warn the person who intends to sue in writing that if he does not cease his actions, he will file a collective action against him. The authorized person cannot file a collective action before the expiration of the period of 14 days from the date of delivery of the warning. A proposal for the issuance of a temporary measure may be filed before the expiration of this period...", it is stated in Article 13 of the Draft Law, and that individual consumers are not required to express their will to be represented by an authorized person in order to initiate this procedure.
Will also write to the European Commission
On the other hand, a collective action for damages must contain information about the parties to the proceedings, their addresses and legal representatives, facts, a description of the collective damage, an estimate of the number of group members, the total amount of monetary compensation for the damage...
These lawsuits may also be settled, and their value is determined as 20 percent of the sum of the estimated value of the group members' amounts or 20 percent of the claim for collective damages. In the case of lawsuits for injunctions, the value of the dispute cannot exceed 10.000 euros.
"The authorized person may request from consumers who have expressed their willingness to be represented in a particular collective action for damages a fee for inclusion in the group under that collective action, which cannot be less than 30 euros. The amount may not exceed 20 percent of the expected amount of damages. The plaintiff may agree with the lawyer that the payment be made so that the lawyer receives a maximum of 10 percent of the amount awarded by the court as a reward," the Draft states.
Montenegro currently only has collective actions for imposing measures under the Consumer Protection Act, which can be used to request the cessation of illegal behavior, i.e. unfair labor or misleading advertising, but these judgments only apply to the future behavior of the trader, while the injured parties cannot receive money based on compensation for damages, price reductions, etc.
Given that the move is towards equalizing consumer rights with those in the EU, the Ministry will have to inform the European Commission once a year about the number and type of collective actions for which court proceedings have been completed, the type of violations and their outcome.
Fines ranging from 500 to 10.000 euros are also provided for, which can be imposed by the court, in the event of failure to comply with or refusal to take injunctions, such as eliminating the consequences, violating the interests of consumers, issuing corrections to unlawful advertising at their own expense, or failing to inform consumers of final judgments on the lawsuit. The same penalty is provided for those who, without good reason, fail to provide the court with the requested evidence.
Volkswagen and fines
In Europe, perhaps the most famous example of class action lawsuits was directed at Volkswagen, due to the 2015 controversy surrounding the circumvention of emissions standards.
Their cars had software that recognized the tests and corrected the amount of emissions based on that. According to Reuters, the German company said that the scandal cost them more than 31 billion euros in fines and court settlements.
According to some of the court decisions, the company had to pay 50 million euros to 60.000 customers in Italy, or 1.100 euros per consumer. In addition, high compensation was also provided for injured citizens in England and Wales, namely 193 million pounds for 90.000 users...
The decision to pay consumers 3.000 euros each was made in Spain, but was later overturned, so the proceedings are still ongoing.
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