1.
We have further consideration to the first of the following
on the basis of further information from the Government. We maintain
our opinion[2]
that it raises questions of legal and political importance, and
continue to make no recommendation for its further consideration
at this stage. We consider that the second of the following raises
questions of legal and political importance, but make no recommendation
for its consideration at this stage:-
DEPARTMENT OF TRADE AND INDUSTRY
|
(17023)
5363/96
COM(95)712
CODEC 109
|
Draft Directive on injunctions for the protection of consumers' interests.
|
|
(17844)
5196/97
COM(96)725
|
Amended proposal for a European Parliament and Council Directive on injunctions for the protection of consumers' interests.
|
|
Legal base:
|
Article 100a; co-decision; qualified majority voting.
|
Background
1.1 The aim of this draft
Directive is to ensure that there is an effective mechanism for
action to be taken to stop suppliers from persisting in unlawful
practices which adversely affect consumers in another Member State.
The proposal is limited to action in relation to consumer protection
measures on which there are already Community directives (the
Consumer Protection Directives).[3]
1.2 The draft Directive
would provide for mutual recognition of "qualified entities"
(consumers' association and/or competition bodies, such as the
Director General of Fair Trading (DGFT) which would act in the
collective interest, before the courts of Member States, to enforce
the laws implementing consumer protection Directives. Member
States would be required to designate a court or other competent
body which would have the power to grant an injunction (an order
to stop or prohibit activities contrary to the Directives). A
qualified entity in Member State A would be able to ask a qualified
entity in State B to take proceedings in State B where consumers
in State A were affected. If the qualified entity in State B
declined to do so, the qualified entity in State A could start
proceedings in State B. One of the objectives of the proposed
Directive is to remedy cross-border problems where current enforcement
systems may be inadequate.
1.3 When we considered
the first draft on 21 May 1996 we put some questions to the Government.
We considered the Minister's response on 17 July 1996. It was
clear that work was still required on the draft to meet the concerns
of a number of Member States, including the UK, and we asked him
to keep us informed at appropriate stages in the negotiations.
The document
1.4 Following the adoption
by the European Parliament at First Reading of 20 amendments,
the Commission has put forward an amended proposal, accepting
17 amendments in their entirety or in part. That document was
adopted by the Commission on 23 December and on 24 January the
Dutch Presidency issued its own suggested text. The Consumer Working
Group discussed this on 30 January and on 7 February a further
Presidency text was issued, a copy of which has been sent to us
by the Government.
1.5 In his Explanatory
Memorandum (dated 26 February) on the second document, the Parliamentary
Under-Secretary of State at the Department of Trade and Industry
(Mr John Taylor) describes the various amendments proposed in
these texts and comments on them. Potential problems of interpretation
and scope are identified in several cases. The amendments include:
-- changing
the purpose of the Directive as being to "approximate"
rather than "co-ordinate" Member States' laws and regulations.
This is the term used in Article 100a, which remains the proposed
legal base;
-- references
to the collective interests of consumers to make it clear
that the Directive is not intended to deal with individual consumer
disputes. The Presidency proposes to insert an explanation that
"collective interests" means "interests which do
not include the mere bundling together or cumulation of individual
interests."
-- amendment
in the Commission text to Article 1.1. to take account of the
fact that some of the Consumer Protection Directives also deal
with "the interests of persons exercising a commercial, industrial
or craft activity and those of the public at large, as against
certain unlawful practices and their effects in terms of unfair
competition."
-- references
to infringements of the Directives which have "unfair consequences
for competitors".
-- the
new recital 16a also states that the provisions of the Directive
could be extended to future directives "whose aims are adapted
to the general objectives referred to in Article 1."
-- amendments
to give no more than three weeks to a qualified entity in one
Member State to react in cases referred to it by another Member
State's qualified entity, rather than "a reasonable time".
The qualified entity in the Member State where the court application
is to be made must be approached first before direct access to
the national courts by the other Member State's qualified entity
is allowed.
The Government's view
1.6 The Minister says
that the Government's concerns on the legal base are not removed
by the latest Commission and Presidency texts and remain as explained
in his EM of 25 March 1996[4].
He told us then that the Government was arguing for Article 220
to be the legal base.
1.7 The Minister sets
out the Government's position on the proposed amendments, in particular
those which refer to:
-- replacing
"co-ordinate" with "approximate". He
says that this change underlines the fact that the proposal has
moved from the original intention to co-ordinate enforcement in
cross border cases. The Directive, thus amended, would require
injunctions to be available in situations where they might not
necessarily be available at present, and would allow other Member
States' qualified entities direct access to the UK courts, which
is not currently permitted. The Government's overall position
is that, while it supports the aim of the Directive (the effective
enforcement of consumer protection directives), it considers co-ordination
to be a better and more proportionate approach to achieving this
aim than harmonisation. It also sees provisions which require
changes to Member States' civil procedures as raising subsidiarity
issues in addition to being outside Community competence.
-- "collective
interests of consumers". The Minister says that the
meaning needs to be clarified. On one interpretation the scope
of the Directive would be narrowed considerably, as it would not
apply to those parts of the Consumer Protection Directives which
create only individual rights of action in the event of breaches
by traders. This would limit the extent to which the procedures
in Part III of the Fair Trading Act (FTA) 1973 could be used to
implement the Directive;
-- "commercial
interests" and "unfair consequences for competitors",
as well as the possibility of more directives being added to the
Annex which lists the nine existing consumer protection Directives.
The Minister fears that these Commission amendments could broaden
the scope of the Directive unacceptably. This, he says, is not
true of the Presidency text.
-- the
inclusion in the Member States' lists of qualified entities of
"where appropriate, the European organisations and/or federations".
The Minister fears that this could amount to a requirement to
recognise such bodies. The Presidency's text, on the other hand,
correctly in his view, preserves the freedom of each Member State
to decide for itself which of its organisations should be recognised
as qualified entities.
1.8 The Minister makes
the point that:
"The great majority
of trading problems in relation to which the DGFT has injunctive
powers are resolved by informal or preliminary procedures without
the case actually going to Court. We attach importance to the
continuation of this approach which tends to be relatively quick,
flexible and cheap. In the case of some of the listed Directives
it also involves industry working closely with the statutory body,
as with misleading advertising. We will aim in negotiation to
ensure that the benefit of these arrangements is not lost."
1.9 Regarding qualified
entities' access to national courts, the Minister says that the
principal effect of Article 4 is unchanged and adds:
"The Presidency's
text does not adopt the suggestion which the Government has made
to the Commission and Member States that, rather than allowing
another country's qualified entity direct access to its courts,
a Member State could require the qualified entity to approach
the domestic qualified entity and, if dissatisfied with its decision
(for example whether to act in a case), would be able to seek
judicial review of its actions."
The Minister fears that
setting a fixed time limit of no more that three weeks for the
domestic entity to "react" in a case referred by another
Member State's qualified entity could present practical difficulties,
although the domestic qualified entity would not necessarily have
to take action to stop the alleged infringement within that time.
He foresees a risk that cases referred by other Member States'
qualified entities would have to take precedence over domestic
ones.
Conclusion
1.10 The Government
does not seem to be making headway in securing support from other
Member States in its negotiations on this draft. Contrary to
the policy objectives initially set out by the Minister, it appears
to be losing the argument in several important respects:
-- the
latest texts continue to quote Article 100a as the legal base.
Indeed, the change of objective from "co-ordination"
to "approximation", the language of 100a, suggests that
the Dutch expect support for a text which not only retains Article
100a but would require new remedies to be introduced;
-- reference
to the "collective interests of consumers" could make
it difficult to use Part III of the Fair Trading Act 1973 to implement
this part of the Directive;
-- the
provisions for foreign qualified entities' to have direct access
to national courts. In his EM dated 25 March 1996 the Minister
noted that if the Commission's draft of Article 4 remained unchanged
new civil procedures would need to be introduced in the UK to
provide the right of action for injunctive relief by foreign organisations
representing consumers. The Presidency has not adopted his alternative
proposal (see paragraph 1.9 above).
-- The
wording of the Commission's original text which gave qualified
entities "a reasonable time limit within which to react"
has been replaced by a three-week deadline which he regards as
unsatisfactory.
1.11 This legislation
could have important implications for UK consumer protection law.
The impact would be particularly significant if the text which
is finally agreed requires major changes to existing national
procedures.
1.12 We ask the Minister
to keep us informed of the progress of negotiations on the draft,
and do not clear the documents.
2 (17023) 5363/96; see HC 51-xx (1995-96), paragraph 1 (21 May 1996), and HC 51-xxvi (1995-96), paragraph 4 (17 July 1996). Back
3 The nine Directives are: Misleading Advertising, Advertising of Medical Products, Unfair Contract Terms, Doorstep Selling, Distance Selling, Consumer Credit, Television Broadcasting, Package Travel and Timeshare. see paragraph 1.7 of our Report of 21 May 1996. Back
4 (17023) 5363/96; see HC 51-xx (1995-96), paragraph 1 (21 May 1996). Back
|
