Legal Updates

Introduction

In March 2022, the Irish Government published the General Scheme of the Representative Actions for the Protection of the Collective Interests of Consumers Bill 2022 (“the General Scheme”). The primary purpose of the proposed legislation is to transpose the European Union (“EU”) Directive on representative actions for the protection of the collective interests of consumers (EU) 2020/1828 (“the Directive”). This will provide for a new legal framework which will allow a Qualified Entity (as defined below) to bring representative actions (also called “class actions” and “group actions”) on behalf of consumers, at both national and cross-border level, in circumstances where a trader has infringed their consumer rights under specified consumer legislation.

The Directive came into force on 24 December 2020 with a deadline of 24 months for member states to transpose it into national law, and with the resulting measures to be applied from June 2023. In Ireland’s case, that deadline has not been met.

On 1 December 2022, the Joint Committee on Enterprise, Trade and Employment (“the Committee”) published a Report on the Pre-Legislative Scrutiny of the General Scheme (“the Report”). In its recommendations, the Committee identified a number of issues that require further engagement from the relevant stakeholders before the General Scheme is implemented into Irish law. These areas include the issue of third party litigation funding and how this will be addressed to give full effect to the transposition of the Directive.

Background to the Directive

The Directive was part of “A New Deal for Consumers” initiative launched by the European Commission in April 2018 to enhance the protection of consumer rights and to facilitate coordination from national consumer authorities at EU level.

Recent high-profile mass consumer rights breaches by private companies, such as the 2015 ‘Dieselgate’ scandal and the 2017 mass flight cancellations, highlighted gaps in consumer rights law across the EU’s internal market.

Current Collective Redress Procedures in Irish Law

Until now, Ireland has been a relative outlier within the EU as it does not have a compensatory collective redress procedure, and there is no legislative framework to facilitate class actions. Instead, there is currently a narrow range of procedural options available to allow multiple claims arising from the same wrong to be litigated as private actions.

Representative Actions

The General Scheme aims to provide a mechanism for multi-party litigation in Ireland (and the EU) by creating a new type of action in which a Qualified Entity may act as a claimant in a representative action brought on behalf of consumers against a trader for breach of specified consumer legislation as set out in Annex I to the Directive (the “Annex”).

The Annex to the Directive includes 66 EU directives or regulations covering consumer rights, and includes legislation relating to:

• product liability and product safety;
• sale of goods;
• travel;
• food safety;
• medical devices and medicinal products;
• data protection and privacy;
• banking and financial services (including UCITS, AIFMD, MIFID);
• insurance; and
• internet, e-commerce and telecommunications.

Under the General Scheme, representative actions can only be taken for breaches of the consumer protection laws listed in the Directive. The General Scheme does not create any new consumer rights.

All representative actions will be taken in the High Court. The General Scheme provides that the courts can make rules on matters such as admissibility, evidence, and the means of appeal.

In assessing the admissibility of any representative action, the court will be required to scrutinise the information provided by the Qualified Entity regarding its funding sources, the nature of the claim and the alleged breach of consumer rights, and the categories of consumers affected.

Any limitation periods in respect of consumers included in a representative action will be suspended pending the hearing of the representative action.

Qualified Entity

Under the General Scheme, a Qualified Entity is any consumer organisation or association designated as qualified to bring representative actions (“Qualified Entity”). An organisation may be designated as a Qualified Entity if it satisfies certain conditions, including that it is independent, has a legitimate interest in protecting consumer interests and has a non-profit making character.

Regulations will be enacted in relation to the process for designating an entity as a Qualified Entity. Any such designation will be subject to review every 5 years, and can be revoked where the organisation is subsequently found not to be in compliance with one of the conditions.

Where several qualified entities bring a single representative action, one must be nominated to lead the conduct of the action. The outcome of the action will bind all entities.

Qualified entities may take cross-border representative actions.

Opt-in

The General Scheme provides for an opt-in mechanism meaning that consumers wishing to be included in the representative action will need to notify their interest in being represented by the Qualified Entity as opposed to being included from the outset.

There is no opt-in provision in relation to seeking injunctive relief (as to which, see below). This means that the Qualified Entity can bring such an action without consumers’ opting-in. Consumers could, therefore, await the outcome of an injunctive relief action and if successful, they could then opt-in to the representative action seeking redress measures.

Remedies

An action can be taken in the High Court seeking injunctive relief (interim or perpetual) and/or monetary redress against a trader who has infringed the consumers’ rights. The court may impose penalties on a trader who fails to comply with an injunction.

An action for redress may be brought where consumers have suffered material loss or any adverse consequences arising from an alleged infringement by the trader of their rights. The types of redress available include compensation, repair, replacement, price reduction, contract termination and reimbursement. Punitive damages are not permitted.

Costs and Fees

The Qualified Entity, not the consumers, will be responsible for the costs associated with taking a representative action, although the entity can charge a ‘modest entry fee’ to consumers in order for the entity to represent them. The usual principles in terms of court costs in this jurisdiction, namely the “loser pays principle”, will apply to these representative actions. As such, if costs are awarded against the Qualified Entity, it will have to pay the trader’s costs.

The issue of funding of representative actions was one of the key issues considered by the Committee. The Report highlighted that the question still remains as to how a Qualified Entity (which is a non-profit entity) will be able to fund large scale consumer redress actions.

Of significance, the General Scheme provides for funding of a representative action for redress “by a third party, insofar as permitted under Irish law”. However, Ireland’s laws of champerty and maintenance prohibit third party litigation funding in Ireland at present (insurance to cover a plaintiff’s exposure to adverse costs is permitted and may be an option that Qualified Entities will consider). The Committee recommended in its Report that proper provision is made for representative actions and third party funding to ensure that the cost of bringing such proceedings does not prevent a Qualified Entity from effectively exercising their right to seek relief.

The issue of third party funding is currently under review in Ireland, with draft legislation (the Courts and Civil Law (Miscellaneous Provisions) Bill 2022) currently before Dáil Éireann in relation to removing the restriction on third party funding of international arbitration in Ireland. Further, in September 2022, a resolution was adopted by the European Parliament which recommended that a new directive should be proposed to establish common minimum standards for third party litigation funding in the EU. Therefore, it is likely that we can expect change in the area of third party funding in the not so distant future.

Next Steps

The text of the formal Bill is awaited. The Bill will then need to pass the Dáil Éireann and the Seanad before it is signed into law. While the final text of the Act remains to be seen, it is anticipated that secondary legislation will be required to further effect the General Scheme, such as new rules of court.

Conclusion

The proposed legislation represents a significant development in Irish consumer protection law by allowing for consumer representative actions. While the issue of funding of such actions will need to be addressed, class actions before the Irish Courts will undoubtedly flow from the enactment of such legislation.

Although the General Scheme does not create any new rights for consumers or impose any new obligations on traders, it is a good time for traders to review their consumer practices, because the introduction of representative actions is likely to result in more frequent and robust enforcement of consumer laws.

Insurance companies should also prepare for the likelihood of increased exposure, as traders may look to their liability insurers to cover their defence costs and any damages or costs awards.

If you require advice in relation to the matters covered in this briefing, please contact a member of our Commercial Litigation Team.

The authors would like to thank Jack Doyle and Aoife Grugan for their contribution to this article.