1 Introduction

After years of discussions and hesitation as regards its shape, in 2020, an EU-wide model for consumer collective redress was finally established. In spite of considerable opposition from business and political groups who feared potential abusive and frivolous litigation, Directive 2020/1828 on Representative ActionsFootnote 1 introduced a mechanism which intends to achieve a high level of consumer protection. The new system aims to address the problem of lack of procedural mechanisms enabling collective consumer law enforcement which has resulted in inconsistent levels of consumer protection in particular Member States. By the time of implementation of Directive 2020/1828 on Representative Actions, some Member States did not have in place any system allowing for collective compensatory measures. Interestingly, Poland has had experience in dealing with mass claims for quite some time, having introduced the Act of Pursuing Claims in Group Proceedings way back in 2009.Footnote 2 Although the number of group actions brought to Polish courts in civil cases has not been as significant as the number of individual cases, the Polish national perspective offers valuable insights into strengths and weaknesses of this mechanism, which could be leveraged to improve the system across the European Union.

The goal of this paper is to explore national experiences in dealing with mass claims. To enable further discussion, it starts by presenting a recipe for collective actions in the Polish way, namely a brief overview of the legislative framework allowing for collective redress with focus on consumer claims (see heading 2 below). Against this background, the evidence-based reality of group proceedings is examined with the purpose of identifying and addressing the problems in the functioning of this mechanism in practice (see heading 3 below). In order to achieve this aim, the paper delves into a case study of the one of the most significant sets of group proceedings so far, which were related to the so-called ‘Swiss loan crisis’ in Poland (see heading 4 below).This in-depth analysis allows me to reflect on possible solutions to the problems identified earlier which could be beneficial for other Member States that are just starting their legislative journey concerning compensatory collective redress (see heading 5 below). Given the constraints of this paper, it is not sought to present an assessment of the effectiveness of group proceedings in Poland as such, something which is planned to be carried out by the author within the framework of a book.

2 A complicated recipe for group proceedings

What is the recipe for collective redress in Poland? Let’s start with the ingredients which are mentioned in the Act on Group Proceedings: at least ten individuals sharing the same or a similar factual basis for a claim, represented by a group member or a group representative. So it has not been too easy to bring monetary claims where this commonality requirement applied: group proceedings are only admissible if the amount claimed by each member is equalised with others through groups or sub-groups of at least two people. There is a solution to potential obstacles in order to fulfil this requirement: if the circumstances relating to some group members are too diverse, the suit may be limited to declaratory relief only. In such a case, each member may still pursue separate follow-up proceedings and claims individually.

Once the ingredients are collected, the cooking starts and the process gets complicated. It includes four stages: certification, group formation, proceedings regarding the substance of the case, and enforcement. The legal proceedings begin with the initiation of a lawsuit on behalf of the group. It might be interesting to note at this point that in Poland two forms of collective redress are available: a group action commenced by a group member and a representative action brought by a district consumer ombudsman.Footnote 3 In accordance with recent legislative changes, the Financial Ombudsman can also act as a group representative, although this authority has not exercised this right so far.Footnote 4 The use of the district consumer ombudsmen as a representative is particularly advantageous for group members as they are not required to pay court fees which depend on the claim’s value.Footnote 5 The group representative acts on behalf of the group and it is a party to the proceedings.

The above-mentioned dual forms of collective redress are strictly connected with a subject matter of the collective claims. In Poland, group proceedings are not limited to consumer claims only. Collective actions can be brought in product liability claims, tort liability claims, claims for liability for non-performance or improper performance of a contract, and unjustified enrichment claims, as well as in all other matters that refer to consumer claims. The Act on Group Proceedings excludes from its scope claims for the protection of personal interests, except for personal injury claims. In the light of the exemption from court fees of consumer claims, they are typically brought by the municipal consumer ombudsman acting as a representative entity. If a group involves not only consumers but also other actors, then it is typically represented by one of group members.

Regardless of whether it is a group or a representative action, Polish law provides that there must be some lawyers involved in the process. In practice, even if a municipal consumer ombudsman acting as a group representative is an attorney him- or herself, that ombudsman is still legally obliged to be represented by a lawyer before the court. Only the Financial Ombudsman may be exempted from this obligation. As far as lawyers in the process are concerned, it might be interesting to note that in Poland contingency fees are explicitly permitted by the law: in group proceedings, lawyers can receive up to 20% of the amount awarded for the claimant by the court.

In its decision to certify the group action the court will confirm that all the requirements for group proceedings have been met. The certification decision includes information about the action, the group representative, arrangements regarding lawyers’ remuneration, and the class members who have initially joined the group. The decision is appealable, and if the requirements for group proceedings are not met, the court rejects the action. In the event that the requirements are fulfilled, the claim’s admissibility is not verified later in the proceedings. The final certification decision marks the conclusion of the first phase of the proceedings.

The stage of claim certification is only the tip of the iceberg. This is because the second stage, namely the group formation, follows an opt-in approach - with all of the well-known disadvantages this brings.Footnote 6 In principle, it is the court which is responsible for notifying all potential group members about the group action, typically by publishing information in the national or regional press. In practice, it is the task of the lawyers representing the group to contact all of the potential individuals (via consumer activists, website, social media etc.) who might be interested in joining the group. If all of them have already joined the action, the court may decide that no further notification is required. To join the group, a potential member who meets the requirements must submit a written declaration to a group representative. After a given time limit (not exceeding three months), the court sets a deadline for the defendant to raise objections regarding the participation of members in the group or subgroups. In monetary claims, the burden of proof regarding group membership lies with the claimant. However, in other claims, it is sufficient to make group membership probable. After the deadline for the defendant passes, the court decides who the group consists of, specifying the names of the group members. The decision regarding the group composition can be (and almost always is) appealed. Once the decision becomes final, opting out of the group is impossible. After addressing the preliminary stages of the case, the court moves into its third phase, where it evaluates the merits of the case and issues a judgment either in favour of or against the claim. The court also determines who will bear the costs of the proceedings.

The operation of group proceedings as briefly examined above has been part of Polish law for almost fifteen years, with some amendments having been introduced in 2017. The late implementation of Directive 2020/1828 on Representative Actions in Poland will result in changes to the existing legislation. However, according to the Government’s proposal, it will not affect the general course of the proceedings’ four stages.Footnote 7

3 Collective actions in practice as illustrated by ‘Swiss loan crisis’

After the recipe comes the reality. What is the taste of Polish group proceedings? From a claimant-oriented perspective it is bitter rather than sweet. According to Government statistics only 319 collective claims have been submitted in civil cases in total in over fifteen years in Poland.Footnote 8 This number is strikingly low, bearing in mind that one must deduct from this 69 cases which were returned due to formal deficiencies and another 52 which were rejected since the claim did not meet the requirements for certification. Why do consumers not want to sue collectively in Poland? Does this reluctance mean that the mechanism of group actions is not working as it was supposed to?

Practice shows that in spite of their formal admissibility, not all consumer disputes are well-suited for collective redress. Although there are some success stories in this respect - just to mention one, there was a saga of group proceedings relating to insurance policies (polisolokaty)Footnote 9 - but there are many consumer claims which although at first sight seem perfectly tailored for collective redress are in the end not fit into the scheme. This can be illustrated by the example of claims arising out of the so-called ‘Swiss loan crisis’ in Poland, which gave rise to a massive increase in the number of consumer claims in Poland.

Starting in early 2000, banks encouraged people to take loans in foreign currencies, mostly denominated or indexed in Swiss francs in order to benefit from lower interests rates in Switzerland, an approach which in a short term was beneficial. Due to the fact that their source of income was mostly in the domestic currency, consumers were exposed to the risk associated with an unfavorable change in interest rate. As a result of the financial crisis in 2008 and after the Swiss franc was unpegged from the euro in 2015, instalment payments increased dramatically. Unlike other EU Member States, no legislative measures had been taken in Poland in order to assist consumers affected by unfair clauses included in loan contracts.Footnote 10 As a result, consumers began court actions invoking the law implementing the 1993 Unfair Contract Terms DirectiveFootnote 11 and sought declarations of nullity of the contracts on the basis of the unfairness of the indexing mechanism, which in their view allowed the bank to arrange the exchange rate at its discretion. According to data presented by the Financial Ombudsman, in 2021 there were approximately 70,000 lawsuits in Swiss franc cases pending before the courts at first instance and about 4.000 cases at second instance.Footnote 12 Consumers who decided to pursue their claims individually before courts won their case in the vast majority of cases (around 97%).Footnote 13 This was mostly because of the pro-consumer interpretation taken by the Court of Justice of the Unfair Contract Terms Directive which permitted finding a solution for problems faced by consumers over the years.

The large scale of claims arising out of the Swiss loan crisis in Poland might have suggested that this problem could be efficiently resolved by mean of collective redress. Hundreds of thousands of consumers entered into the agreements with banks based on the same contract forms which included unfair contract terms. Although the amount of repayment could differ considerably depending on the contract, most consumers entered into a contract which involved the same indexing mechanism. Even if the commonality requirement was not fulfilled, because the amount claimed by each member could not be equalised with others through groups or sub-groups of at least two people, Polish law allowed for a collective claim limited to a declaratory relief only. So why were the claims arising out of the Swiss loan crisis not deemed well suited for collective redress? The answer might be exemplified by a case study of the biggest group proceedings so far against Millenium Bank.Footnote 14 The significance of this case could be justified for at least two reasons: the size of the group - more than 5000 consumers opted in - and the duration of the proceedings – it has been pending for ten years already.

4 Group proceedings against ‘Millenium Bank’ – a case study

In 2014, the Municipal Consumer Ombudsman in Olsztyn, a group representative, brought a lawsuit to confirm the bank’s liability for unjust enrichment resulting from the collection of excessively high amounts of loan instalments from group members. The amount of these instalments was calculated in accordance with the provisions of the agreements based on a contract form containing abusive clauses regarding the indexation of the amount of the loan granted and its repayment instalments at the Swiss franc exchange rate. According to the claimant, the unjust enrichment was caused by the application of the abusive clause according to which the defendant charged the group members higher amounts for loan repayments. The claimant argued that this fulfilled the admissibility criteria for group proceedings, stating that each group member had claims of the same kind, based on the same or a similar factual basis. It argued that each member of the group had entered into an agreement based on the use of the same abusive indexation clause (which was confirmed by a judgment of the Court of Competition and Consumer Protection (in Polish: SOKiK)), subsequently entered in the register of abusive clauses.Footnote 15

In 2015 the district court in Warsaw rejected the lawsuit due to the lack of “the same or the similar factual basis of the claim.”Footnote 16 The court of appeal in Warsaw amended the decision and refused to reject the lawsuit, stating that the district court unjustifiably considered the factual basis of the claim as all circumstances that need to be established in order to decide on the merits of the claim in the judgment.Footnote 17 The proceedings were very lengthy due to the procedural errors which occurred in the course of the proceedings. By way of example, the district court in Warsaw did not adjudicate on the admissibility of group proceedings within the time frame specified in the Code of Civil Procedure, but during a closed-door hearing. Additionally, the court did not hold a mandatory hearing before issuing a judgment. As a result of numerous complaints, the composition of the group was not determined until 2019. The case was supported by various institutions - in 2021, the Polish Commissioner for Human Rights joined the case and in 2023 so did the Financial Ombudsman.

In 2022, the court of first instance adjudicated on the merits and denied the claim. Quite surprisingly, it found that the indexation clauses in the loan agreements were not abusive. In particular it stated that

”[…] in the opinion of the adjudication panel, the claimant did not prove that the provisions of the Group Members’ loan agreements containing the same regulations, shape their rights and obligations as consumers, in a manner that is contrary to good practices, grossly violating their interests. (…) The fact that the exchange rate according to which the due loan instalment to be repaid was converted, in the manner resulting from the Agreements linking the respondent with the Group Members (…), was determined by the Respondent’s employees, does not yet mean that it was arbitrary. This is because, apart from a bare allegation, the claimant has not shown adequate activity to prove the aforementioned allegation. Meanwhile, aiming to prove the thesis that the defendant determined (shaped) the CHF exchange rate in an arbitrary manner, the plaintiff should indicate - by precisely quoting the rates used by the defendant and comparing them with the rates quoted on the market - that indeed the defendant’s rates, as well as their fluctuations, do not correspond to market indications, i.e. deviate from them to such an extent that they can be treated as rates determined in an arbitrary manner.”

5 What is to be learnt from experiences?

Of course, one may say that one swallow does not a summer make, and it would be unreasonable to claim that one instance of collective litigation makes the whole mechanism of group proceedings ineffective. However, it clearly sheds light on significant problems which are faced by the whole Polish system of justice.

The first obvious dysfunction of group proceedings in Poland consists of their excessive duration. Sometimes the length of proceedings is justified by the complex subject matter of the case but mostly it is rather a matter of bad case management by the court on the one hand or a procedural tactic by the defendant on the other. It is common knowledge that lengthy court proceedings constitute a problem for the whole justice system in Poland and this is equally as true for group proceedings as it is for individual proceedings. Judges are overwhelmed by the number of actions to be dealt with and adjudicate on cases in the order in which they are brought. However, as was demonstrated above, group proceedings are unique in the sense that they constitute a multistage process which require many court decisions before a case is adjudicated upon on its merits. In practice, all court decisions - on the admissibility of claim, on an order on publishing the announcement on group action as well as on a decision on group formation - are the subject of appeal which considerably prolongs the duration of the proceedings.

Secondly, in terms of effectiveness of group actions, the interplay between public and private enforcement needs to be addressed. Our example of the Millenium Bank case shows that the bank used the contract clause which overlapped with the unfair contract term which had already been recognised as such by the Court of Consumer and Competition Protection (SOKiK) in 2010. This judgment was issued within so-called “abstractive control” of the contract term which is currently under the competence of President of UOKiK.Footnote 18 There is no doubt that for the purpose of the effectiveness of any follow up procedures, a final judgment regarding abusiveness issued within the abstract control of the contract term constitutes a prejudicate for any future individual or group proceedings involving the use of the same abusive clause by the same trader. Of course, the court adjudicating in the individual or group action has to verify whether the claim is justified, meaning inter alia, whether the specific provision of the contract overlaps with the abusive contract terms and, in the case of a monetary claims, must verify the amount of payment requested by the claimant. However, the court is not to examine again whether the clause is abusive or not. In practice, traders question the binding effect of the final judgment regarding the abusiveness and - as was demonstrated in the case in hand – regrettably, courts sometimes agree with these arguments, which significantly delays the proceedings.

Thirdly, the case study shows that the interpretation of European Union law, such as the Unfair Contract Terms Directive, is still an issue in Poland. National courts, which are at the same time European Union courts, are under an obligation to apply European Union law and to interpret national law in line with the goals of the Unfair Contract Terms Directive. One such goal, which ensures consumer protection, is correcting the imbalance which exists between the consumer and trader, and is undertaken by the positive action of an entity unconnected with the parties to the contract, namely the court.Footnote 19 In case of doubts, national courts are to follow the interpretation of the Court of Justice, which in terms of Directive on Unfair Contract Terms, has been very broad and coherent.Footnote 20 It follows from the case law of the Court of Justice that contractual terms in consumer contracts must always be drafted in plain, intelligible language and consumers should be given the opportunity to examine all the terms of contract.Footnote 21 According to this requirement, the contract should set out transparently the specific functioning mechanism of conversion for the foreign currency to which the relevant term refers and the relationship between that mechanism and that provided for by other contractual terms relating to the advance of the loan. A consumer must be in a position to evaluate, on the basis of clear, intelligible criteria, the economic consequences for him or her which derive from this.Footnote 22 This Court of Justice case law was clearly ignored by the court that adjudicated in the group proceedings against Bank Millenium.

The institutional support for consumers pursuing their claims collectively constitutes a brilliant concept, at least in theory. The institutions include the municipal consumer ombudsman who can represent consumers, the Financial Ombudsman, the Commissioner for Human Rights as well as the President of UOKiK who can provide an expert opinion on the case. Practice shows that they use their competences in this respect. However, the question remains to what extent the expert opinions issued by these institutions should be recognised by national courts. In our example of the collective claim against the Millenium bank, all of the above-mentioned institutions were involved. The group action was brought by the municipal consumer ombudsman, the case was supported by Polish Commissioner for Human Rights and, at the later stage of proceedings, the Financial Ombudsman also joined the case. Nevertheless, the extensive opinion provided by the Commissioner for Human Rights - including guidelines for the court in terms of the interpretation of EU law - was completely ignored by the adjudication panel. The national court did not once refer to the arguments presented by this institution. Of course, the court is independent and by no means obliged to follow such opinions. However, it might be reasonably expected at least to justify why it does not agree with the arguments presented by the expert institution.

Additionally, a clear disadvantage of collective redress in Poland is that in practice the outcome of group proceedings is highly unpredictable. In the Millenium case, consumers were represented by top lawyers specialising in group proceedings who, in spite of having an enormous amount of work (the court files amounted to hundreds of volumes) and being given a very limited timeframe by the court to respond to court orders, represented the group very diligently. This did not help much since the claim was adjudicated upon by a judge who was clearly reluctant not only as regards group proceedings but also regarding the consumer claims arising out of the Swiss loans in general. It should be recalled that in this case more than 5000 consumers were involved. What is particularly striking is that while all of these consumers were stuck in the proceedings which had lasted more than a decade so far, in the meantime thousands of others pursuing their claims individually had received final judgments - and in 97% of the cases, they won the case.

This brings us to another significant problem with the Polish justice system in general, namely limited access to justice. The excessive length of proceedings has been mentioned already as one of the obstacles which hinders this access. Costs of proceedings still remain a significant barrier to access to court. In order to pursue an individual claim arising from a loan contract, then, in addition to court fees, a consumer must pay approximately PLN 20,000-30,000 to the lawyers for handling the claim before the court of first instance. This is not a trivial cost, bearing in mind that the average monthly remuneration in Poland is around PLN 7000 gross. Additionally, in line with the so-called ‘loser pays principle’, a claimant must bear a risk of paying all the defendant’s fees from the proceedings, including lawyers’ remuneration in the event that the claimant loses the case.Footnote 23 On the contrary, for participating in group proceedings consumers pay just a small fraction of the amount paid for individual cases. Information about the remuneration of lawyers in particular group proceedings is publicly available – it is included in the court order published in the newspaper in order to allow other potential group members to opt in. If multiplied by several hundreds of consumers involved in the group, it may amount to quite a number. However, for most lawyers it is still far less beneficial than representing consumers in an individual case. And here comes a surprising point - due to the very risky and time-consuming nature of group proceedings, lawyers in Poland may not be interested in representing consumers in class actions in the future. This could be opposite of the fears of the European Commission which was so afraid of profit-driven, frivolous or even abusive litigation commenced by lawyers.

Remaining on the topic of the costs, it cannot be overlooked that the funding of group proceedings is a key aspect of the effective functioning of this mechanism. If consumers are not able to pursue their claims individually and the only ‘incentive’ for group proceedings is exemption from court fees, then there must be some financial resources which allow consumer ombudsmen to do their job. Since they act as the group representative and are considered to be a claimant in the case, ombudsmen are to be present at the court hearings and actively take part in the proceedings, which last at least several years. Meanwhile, practice shows that the institution of municipal consumer ombudsman is clearly underfunded in Poland. While making a decision whether to represent the group or not, the first thing to consider by the municipal ombudsman is whether it has enough human and financial resources to administer the claim. And the truth is that often it does not. One may wonder why in case against Millenium Bank consumers from across a whole country were represented by the regional consumer ombudsman from a small town of Olsztyn. The answer to this question is of a very practical nature - it is because this entity had enough time and resources to take part in the claim. At the same time, the consumer ombudsman from Warsaw was involved in so many group proceedings at that time that she was not able to represent consumers in another case. Bearing in mind that the total number of group proceedings is relatively low, the limited funds available could constitute an even more serious problem in the event of an increase in the number of class actions.

6 Conclusion

Acting as a devil’s advocate in this paper, I wanted to highlight the most burning issues relating to the use of Polish group proceedings in practice. While the picture presented here might not be very optimistic, it must be noted that it is only a tiny fraction of the whole system which can work if administered properly. I believe that the main problem of the whole Polish system of justice is that it is overloaded by the number of cases, and this of course has an effect on the situation of consumers, who must wait for their judgments several years. On the other hand, judges are reluctant regarding group proceedings because this mechanism is not commonly used in practice. They have to learn how to proceed in accordance with the Act on Group Proceedings which obviously entails more effort since (as was demonstrated above), it is a multi-level procedure which requires many court decisions at various stages of the proceedings. Additionally, for the purpose of court statistics, group proceedings are counted the same as individual proceedings which additionally discourages judges from adjudicating in line with this procedure.

While this paper does not seek to answer the big questions regarding the functioning of the justice system at general, it argues that some changes are indispensable if we want the system of group proceedings to meet its objectives. Interestingly, the legislative framework for group proceedings has been positively assessed by attorneys and the main problem articulated by them is the lack of understanding of the goals of this procedure by some judges. A very interesting suggestion which has been voiced by some legal professionals is the creation of a single court which could be competent for resolving mass claims only. This would enable the judges to specialise in this type of procedure and help to establish a uniform case law which could be followed in future cases.