Representative Actions for the Protection of the Collective Interest

Last month, the Government published the General Scheme of the Representative Actions for the Protection of the Collective Interest of Consumers Bill 2022 (the Bill).

The Bill will bring significant reform to Irish law as it aims to transpose the European Union Representative Action Directive (EU Directive 2020 1828) (‘the Directive’) into Irish Law. In doing so, the Bill will introduce a framework whereby consumers who have suffered material loss due to a breach of EU Consumer Protection Law can act as a collective akin to the class-action style lawsuits widely available in other jurisdictions.

The Representative Actions for the Protection of the Collective Interest of Consumers Bill 2022

There are currently no comprehensive provisions in Irish Court rules for tackling class actions in a consistent manner. Rather, a range of procedural options are available to allow claims involving multiple litigants to be litigated as private actions. Once enacted, the Bill will mark one of the most significant reforms in consumer protection in the country in decades by introducing a framework that will allow for collective actions (otherwise known as class actions). The Bill aims to give effect to the Directive by creating a new civil litigation mechanism by which a Qualified Entity may act as a claimant party on behalf of consumers who have opted into a representative action against a trader in the High Court. Qualified entities will be able to apply for injunctive relief and other redress including compensation, repair, replacement, price reduction, contract termination or reimbursement on behalf of consumers.

The term class action has some negative associations, particularly when considered in-light of the highly litigious class-action procedure in US. As such, the Directive and the Bill incorporate strict criterion which must be met to bring redress action in Ireland and other Member States.

Qualified Entities

The Directive and the General Scheme of the Bill require a Member State to designate a ‘qualified entity’ to bring actions on behalf of customers. To bring an action on behalf of affected customers under the bill, a consumer organisation must meet the following criteria:

• Must be able to demonstrate 12 months of actual public activity in the protection of consumer interests prior to its application.
• Must show a legitimate interest in protecting consumer interests as provided in EU law
• It must have non-profit making character.
• Must demonstrate that it is independent and not influenced by persons other than consumers, in particular by traders, who have an economic interest in the bringing of any representative action.

Any such non-profit organisation will be able to apply to the Minister for Enterprise, Trade and Employment for designation as a Qualified Entity.

Safeguards

Along with the qualified entity requirement, a number of other safeguards are built into the bill. The High Court will enjoy the discretion to dismiss any claim, at the earliest stage possible where it is deemed to be ‘manifestly unfounded’. There is scope to settle claims, with the approval of the court. The scope for action under the Directive is limited to EU Consumer Protection legislation, as included in the schedule of the Directive. The onus is also on Member States to ensure rules are in place preventing consumers fromm bringing an individual action and then benefitting from the collective action.

Costs

Any costs incurred in the bringing of a representative action will be borne by the Qualified Entity. The bill also provides that orders for costs will be determined in the ‘loser pays’ principle, as set out in the Legal Services Regulation Act 2015. Essentially, the losing party must pay the winning party’s costs. This rule balances the right to access to justice of consumers, while protecting businesses from frivolous claims.

The publication of the scheme of the bill is welcome as it introduces a scheme that is limited in nature and still very different to the US class action procedure. The Directive contains some very necessary safeguards to prevent frivolous claims. However, businesses with a presence in multiple Member States ought to be wary as the introduction of the Directive will undoubtedly lead to an increase in domestic and international consumer litigation. Member States have until 25 December 2022 to transpose the Directive into law and Lavelle Partners will continue to monitor any developments in the area.

About the author: Ciarán Leavy, Partner and Head of Dispute Resolution