Consumer Representative Actions in Ireland
An Act to implement the EU Collective Redress Directive (the Directive) in Ireland was signed into law by the President of Ireland on 11 July 2023.
The Representative Actions for the Protection of the Collective Interests of Consumers Act 2023 will provide the first effective framework for collective redress in Ireland allowing many potentially low-value individual claims based on breaches of EU Consumer law to be bundled together by a ‘Qualified Entity’ and litigated in a single action (known as a representative or class action) at both national and cross-border level.
The Act provides that the new representative actions procedure will be available for breaches of a wide range of EU-derived consumer protection law, covering areas as diverse as life sciences, data protection, sale of goods, and product safety.
Reform in this area was prompted by perceived practical and administrative barriers to consumer redress identified in the aftermath of a series of consumer mass harm events, including Dieselgate, and the DePuy hip replacement recall. It is envisaged that the Representative Actions regime will allow for more efficient redress in the event of future widespread consumer harm - see our previous briefing on the Directive here.
About the Act
The significance of the Representative Actions Act cannot be overstated. Ireland is, in effect, creating a brand-new mechanism for litigating, that will for the first time allow groups of consumers to bring representative actions in Irish courts. The various sections of the Act will need to be commenced and secondary legislation will be required to outline the mechanical process for taking a representative action under the Act. However, based on the published text, there are several features worth noting.
The Act provides for organisations to apply to the Minister for Enterprise, Trade and Employment for designation as a ‘qualified entity’. The underlying Directive requires that only such qualified entities may initiate a representative action on behalf of consumers under the legislation. The requirements for designation are directly transposed from the Directive. Issues such as whether the entity has demonstrated 12 months’ activity in protecting consumer rights, or whether it has a non-profit making character will be considered on application to the Minister. These issues may also be considered by the Court upon initiation of an action. The Act specifies that a defendant trader may raise objections in respect of any Court application.
Notably, the enacted legislation includes more onerous criteria for designation as a qualified entity than the underlying directive.
The Directive requires that an entity has a statutory purpose that demonstrates a legitimate interest in protecting the interests of consumers to qualify. However, the proposed domestic law requires that an entity’s main purpose be one that demonstrates that it has a legitimate interest in protecting consumer rights. The insertion of the “main purpose” requirement is new, and the addition will make it more difficult for organisations to be designated as “qualified entities” in Ireland than in other member states.
The Act also requires that an initiating qualified entity must provide the court with information on the sources of funding of the representative action, the nature of the claim, and of the alleged infringement, and the class or classes of consumer affected by the alleged infringement.
In respect of cross-border cases, the European Commission will hold a list of Qualified Entities which is regularly updated by each Member State. Entities that are included on the list must be recognised as Qualified Entities by national courts.
It was proposed in the Directive that the new regime would apply to actions brought on or after 25 June. This language suggested that the legislation could apply to infringements before that date. However, the Irish legislation has taken a further step to confirm that the legislation will only apply to actions brought in respect of infringements occurring on or after 25 June 2023, avoiding the risk of past infringements being litigated collectively in Ireland.
Third Party Funding
A significant feature of the Irish legislation is that it (section 27) allows representative actions to be funded by third parties “insofar as permitted in accordance with law”. This calls the practical application of the legislation in Ireland into question in that under current Irish law, third party funding for civil actions is prohibited. As a result, “qualified entities” must fund actions themselves in Ireland, except for a “modest fee” that can be charged to the consumers it represents. This issue could undermine the effectiveness and operation of the mechanism that was intended by the EU Commission. It remains unclear how the not-for-profit entities bringing actions for collective redress can be funded without the assistance of third parties and this is an issue which is likely to be the subject of much debate over the coming months.
The Act as currently drafted cannot operate as intended by the EU Commission until third party funding is legislated for in Ireland. The prohibition of third party funding is under consideration by the Law Reform Commission, and progress is apparent with the recent publication of a consultation paper on the issue, but until it issues recommendations, and further legislation is passed by the Oireachtas, there will remain a significant gap between what was legislated for in Brussels, and what will apply in Ireland.
Articles 8 and 9 of the Directive set out the remedies available to consumers. Consumers can seek relief in the form of an injunction or redress.
Anticipated Impact of Directive
The Directive is likely to have a significant impact on consumer litigation across Europe, as it provides for a harmonised approach which will make it easier to fund and resource collective redress actions, and for jurisdictions like Ireland, introducing a collective redress mechanism into law for the first time.
The introduction of a harmonised approach to collective redress will result in an increased risk of class actions against consumer-facing businesses with an EU footprint. In order to be adequately prepared for this, firms will need to carry out a major re-evaluation of litigation risks, particularly in high-risk sectors. The financial services, travel and tourism, energy, and telecommunications industries are all named in the preamble of the Directive as being of particular importance, given the high-level of consumer protection that these sectors require.
Lastly, as most continental legal systems do not have disclosure obligations, the introduction of discovery across Europe is a significant development.
Anticipated Impact of the Act
As an English-speaking, common-law jurisdiction and the headquarters of a large number of companies across all relevant sectors, Ireland is likely to be seen as a logical venue for collective actions.
However, the risk of a proliferation of such claims is likely to be countered by the approach Ireland has taken to implementing the Directive. In particular, the prohibition on third party funding eliminates much of the necessary ingredients for representative actions which are the “fuel” for such actions in markets such as England, Australia, the US and even Portugal and the Netherlands.
Accordingly, it may be some time before the risk for global companies increases in Ireland the way it has in other jurisdictions.
However, developments in Ireland are part and parcel of the wider globalisation of litigation funding and collective litigation market. A claim brought in Ireland will often be part of a wider portfolio of similar claims being brought in other markets, particularly, the US, England, Australia and Canada due to the similarity of their legal systems.
This Directive has major consequences for all types of businesses and all consumer facing businesses should begin to familiarise themselves with the Act, and the potential legal, financial and reputational risks it may pose. We have been forecasting the impact of the new regime for many years and we will continue to keep our clients informed of the pan-European system of class actions.