A Step Closer to Representative Actions for Irish Consumers

The Government has recently published the General Scheme of Representative Actions for the Protection of the Collective Interests of Consumers Bill 2022 (the “Scheme”), which will give effect to the Representative Action Directive (EU 2020/1828) (the “Directive”). 
 
The Scheme creates a new civil litigation mechanism (a type of class action) by which a Qualified Entity may act as the plaintiff party on behalf of consumers in a ‘representative action’ against a trader in the High Court. The Qualified Entity may seek either an injunction or redress, or both, against that trader for breaches of consumer protection law, in a broad range of sectors such as data protection, financial services, travel and tourism, energy, and telecommunications.

While there are currently some types of multi-party litigation in Ireland (such as test cases and representative actions), these types of actions are very limited in scope and have a number of draw backs. The new type of representative action introduced by the Scheme will have much broader application.

Qualified Entity
 
An organisation may apply to the Minister for Enterprise, Trade and Employment Remedies to be designated as a Qualified Entity for both domestic and cross-border actions, if it meets certain criteria. An organisation must:
 

• be a legal person constituted under Irish law that can demonstrate 12 months of public activity in the protection of consumer interests;
• demonstrate a legitimate interest in protecting consumer interests;
• have a non-profit-making character;
• be solvent;
• be independent; and
• publish certain information in plain and intelligible language, in particular on its website.

Qualified entities from other Member States may also bring a representative action before the Irish courts on a cross-border basis.

Remedies

The types of remedies that a Qualified Entity can seek on behalf of consumers in accordance with the Scheme, are:
 

1. injunctive measures, including a provisional (interim, ex-parte) measure or a definitive (permanent) measure to cease or prohibit an infringing practice;
2. redress measures, including compensation, repair, replacement, price reduction, contract termination or reimbursement, but not punitive damages (where the consumers have suffered material loss, or any adverse consequence due to a breach of EU consumer protection law); and
3. a settlement agreement which is subject to approval by the court, and which is binding on the trader, the qualified entity and on the consumers concerned. 

Procedure

The Court must assess the admissibility of any representative action brought by a Qualified Entity, and has the power to dismiss a representative action which appears to the Court to be manifestly unfounded at any stage of the proceedings.

Injunctive Measures

Where a Qualified Entity is seeking a permanent injunction, the Scheme provides for a two-step process. Before applying for a permanent injunction, a Qualified Entity must engage in pre-litigation consultations with the trader with a view to having the trader cease the alleged infringement, without the need for a representative action.  This pre-litigation consultation can be by way of Alternative Dispute Resolution. 

Where the trader does not engage, or the consultations are unsuccessful in resolving the matter, a representative action can then be brought by the Qualified Entity. 

The Scheme confirms that in a representative action for an injunction, there is no requirement for consumers to have opted into the action.

Redress Measures

Consumers must ‘opt-in’ to a representative action for redress by notifying the Qualified Entity in writing. Consumers must opt-in before the defendant trader enters an appearance in the proceedings.  A consumer who does not opt-in will not be entitled to benefit from the remedies obtained by that representative action.

The Qualified Entity may charge consumers a “modest entry fee” in order to raise finance for the cost of the representative action. The maximum amount of the entry fee will be prescribed by regulation. 

Costs and Funding

Qualified Entities, and not consumers, bear the costs of a representative action (save for the payment of any entry fee charged to consumers to join the representative action). Individual consumers may be ordered to pay part of the costs of proceedings where their conduct results in a party incurring costs.

The unsuccessful party in a representative action will be required to pay the cost of the proceeding in accordance with the usual costs ‘follow the event’ (i.e. loser pays) principle.

While the Directive provides for third-party funding of representative actions, third party funding of litigation is generally prohibited in Ireland under the common law doctrines of maintenance and champerty.

The Scheme does not alter the prohibition on third party funding. However the Scheme does provide that when the Court is assessing the admissibility of a representative action,  the Court must ensure that any conflicts of interest are prevented: “ [w]here a representative action for redress is funded by a third party, insofar as permitted under Irish law, the Court shall ensure that any conflicts of interests are prevented and that funding by third parties that have an economic interest in the bringing or the outcome of the representative action for redress measures does not divert the representative action away from the protection of the collective interests of consumers.”

This could indicate that changes to the ban on third party litigation funding may be under consideration, particularly as there has previously been calls for reform in this area. For instance, Chief Justice Frank Clarke published a report in January 2020, which recommended that proper provision is made in Ireland for litigation funding.

Conclusion

The publication of the Scheme of the Bill is a step in the direction towards the introduction  of a type of class action for consumers. While it is unclear how long the legislative process will take, the Directive must be transposed into Irish law by 25 December 2022 and must be applied from 25 June 2023.

The effectiveness of representative actions as a form of collective redress for consumers, will depend in part on how proactively any designated Qualified Entities will use the powers afforded to them to bring representative actions on behalf of consumers.

Once the Bill is enacted, it will remain to be what approach designated Qualified Entities will take towards bringing representative actions.

Written by: Aisling McMorrow