The Irish government, in recent weeks has approved the drafting of legislation intended to improve access to justice for consumers.
It is not currently possible to bring a class action suit in Ireland. Typically, where multiple plaintiffs have similar claims, litigation is progressed by a ‘test case’. However, the plaintiff in a test case faces the risk of costs being awarded against them if they lose. This can act as a significant deterrent to litigation.
WHAT CHANGES DOES THE DIRECTIVE INTRODUCE?
The Representative Action Directive (EU Directive 2020/1828) of the European Parliament and of the Council of 25 November 2020 introduces a model for representative actions on behalf of consumers across the EU where “mass harm” situations occur. It gives designated “Qualified Entities” the power to take enforcement action on behalf of a group of consumers whose rights have been breached in Ireland or in another EU country.
The Directive builds on the Injunctions Directive (2009/22/EC) and is part of an EU-wide response to recent mass consumer rights breaches by private companies, such as in connection with car emissions and mass flight cancellations.
It will also allow several Qualified Entities, once designated in their own Member States, to join together on a cross-border basis to bring a representative action where European consumers have been harmed by the same alleged infringement, caused by the same trader, in several Member States.
Only “Qualified Entities” can take a representative action on behalf of the effected consumers and they must satisfy the following criteria:
- 12 months of actual public activity in the protection of consumer interests prior to its application;
- legitimate interest in protecting consumer interests;
- independent and not influenced by persons other than consumers; and
Any such non-profit organisations will be able to apply to the Minister for Enterprise, Trade and Employment for designation as a Qualified Entity.
A Qualified Entity may seek an injunction or redress, or both, against a trader. In an Irish context, the High Court will hear representative actions.
The Qualified Entity will bring the action and be the plaintiff, while the consumer may be required to pay a “modest” entry fee to the Qualified Entity to be represented by it. The Minister for Enterprise, Trade and
Employment will prescribe the maximum fee that may be charged in regulations yet to be announced.
Currently, third-party professional funding of litigation in Ireland is prohibited in all but very limited circumstances. The Directive leaves open the possibility of such funding in representative actions, subject to the laws of each Member State. Significantly, the Representative Actions Bill 2022 does not explicitly prohibit third party funding. Rather it states that where a representative action is funded by a third party, insofar as it is 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 does not divert the representative action away from the protection of the collective interests of consumers. This is perhaps an indication that, in the context of consumers, a limited easing of the prohibition on third-party funding may be on the way.
Any costs incurred in the bringing of a representative action will be borne by the Qualified Entity. In exceptional circumstances the Court may order an individual consumer to pay part of the costs of the proceedings due to that individual’s own intentional or negligent conduct. This would appear to be a severe sanction where the consumer is not a party to the proceedings and an example given in the Representative Action Directive is the prolonging of proceedings because of unlawful conduct.
There will be provision for an out-of-court process (i.e. alternative dispute resolution mechanism) for a Qualified Entity and a trader if they can negotiate an informal resolution to their grievance.
Consumers will be entitled to compensation, repair, replacement, price reduction, contract termination or reimbursement of the price paid, as appropriate and as available under EU or national law. A consumer affected by an alleged infringement must notify the Qualified Entity in writing of their wish to be represented by it.
Qualified Entities may also seek an interim or permanent injunction. The Representative Actions Bill 2022 confirms that in a representative action for an injunction, there is no requirement for named consumers to have opted into the action.
Notably, before a Qualified Entity may commence a representative action for a permanent injunction, it must attempt to engage with the trader concerned in an effort to resolve the alleged infringement. Evidence of this attempt must be shown to the court.
For cross-border actions, consumers must expressly opt-in where they are not habitually resident in the Member State where the action is to be taken.
The introduction into Irish law of a collective action mechanism is limited in nature and is still very different to the US class action regime. It is intended to improve access to justice for consumers and it remains to be seen who will apply to become a Qualified Entity and start seriously considering these actions in Ireland and in other EU Member States.
It is important to note that there will be mechanisms in the collective redress system to prevent abusive and opportunistic litigation and traders will continue to enjoy the same legal rights and protections as they do in any other civil legal proceedings.
Member States have until 25 December 2022 to transpose the Directive into their national laws and Addleshaw Goddard will continue to monitor developments in this area.