by Joe O'Malley , Laura Fannin September-09-2021 in Litigation & Dispute Resolution, Commercial & Business, Competition Law
Currently, in this jurisdiction there is no legislative framework to facilitate class action cases. Instead, the Courts can deal with multi-party actions in several ways under the Rules of the Superior Courts and through various statutory provisions. These consist of representative actions, joinder and consolidation of actions, and test cases. However, none of these methods allow for the affected parties to recover damages.
The reform of multi-party actions was referred to the “Review of Administration of Civil Justice Committee”, chaired by Mr Justice Peter Kelly. In their recent report the introduction of a new and comprehensive procedure for multi-party actions was promoted.
On 20 December 2020, the Directive on representative actions for the protection of the collective interests of consumers (2020/1828) (“the Directive”) entered into force. EU Member States have until 25 December 2022 to transpose the Directive, with a further six months to apply it. Accordingly, it will be 2023 before collective redress actions can be commenced in Ireland. From March to May 2021 the Department of Justice initiated a consultation process and received submissions from various interested parties. It is expected that the legislative process to implement the Directive will commence following consideration of these submissions.
Once applicable in Ireland, it will enable collective redress actions to be launched in the Irish Courts by qualified entities on behalf of consumers, when they have suffered harm by traders who breach EU law. It applies to both domestic and cross border infringements.
Scope of the Directive
The Directive obliges Member States to implement a system whereby qualified entities can bring actions on behalf of consumers collectively against traders for infringements of EU law, in areas such as data protection, defective products, financial services, travel and tourism, energy, health and telecommunications.
Currently it is not clear what type of entity will be established to deal with collective redress actions, or whether they could deal with cross border representative actions as well as domestic representative actions.
Who can bring the Action?
Only qualified entities designated by Member States can bring collective actions on behalf of consumers. Member States have discretion as to the criteria they apply to a body that wishes to be a qualified entity for the purpose of bringing domestic collective actions on behalf of consumers, so long as any such criteria is consistent with the Directive. Under the Directive, a qualified entity from another Member State can bring a cross border representative action in Ireland concerning Irish consumers and Irish traders. It is important to note that if less stringent criteria are imposed on qualified entities, then it could result in “forum shopping” whereby if a company has a branch or subsidiary in a Member State with less stringent criteria then there may be increased actions being taken in this Member State. Similarly, if there are more stringent criteria imposed on qualified entities, this may create obstacles for qualified entities compared to those in other Member States.
Where, however, a body wishes to be a qualified entity for the purpose of bringing cross boarder collective actions on behalf of consumers it must;
- be a legal person that is constituted in accordance with national law of the Member State;
- demonstrate 12 months of actual public activity in the protection of consumer interests prior to its request for designation;
- have a statutory purpose demonstrating it has a legitimate interest in protecting consumer interests;
- have a non-profit making character;
- be 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.
Under the Directive individual consumers will have the choice to either opt-in or to opt-out of any particular action. The Directive has allowed Member States to decide which mechanism they will impose. In the Law Reform Commission’s 2005 Report on Multi-Party Litigation, they endorsed the “opt-in” system for consumers. The opt-in system has the benefit of being more familiar, while also being based on consent from the consumer. This system would reflect the rights of each consumer to decide whether to pursue their claim and to take part in a multi-party action. While the opt-in system has been endorsed by the Law Reform Commission, the Law Society, in their submissions to the Public Consultation on this Directive noted that the opt-in system may face issues with the Statute of Limitations. It could prove difficult to determine when the Statute stops against the defendant trader. Similarly, there may be a difficulty if a consumer wishes to opt in after proceedings have been issued.
Remedies
The Directive will allow qualified entities to seek two types of relief in their collective actions:
- Injunctive measures: A qualified entity can seek measures to cease a practice or, if appropriate, to prohibit a practice, where the practice would constitute an infringement of EU law.
- Redress including compensation, repair, replacement, price reduction, contract termination or reimbursement.
Costs
The Directive seeks to protect traders somewhat against abusive litigation by allocating judicial costs for redress measures based on the “loser pays” principle.
Individual consumers will not be required to pay the cost of the proceedings if unsuccessful. Rather the qualified entity will be required to pay. However, a consumer may be ordered to pay the costs of proceedings that were incurred as a result of the individual consumer’s intentional or negligent conduct.
Third Party Funding
There are also strict rules on the funding of these actions. If a third party funds an action, where national law permits, the third party must not unduly influence the decisions of the qualified entity or be a competitor of the Defendant. It remains to be seen how Ireland will deal with third party funding in the implementation of the Directive, as third party litigation funding is not generally permitted in Ireland.
Conclusion
The Directive has been welcomed by consumer bodies across the EU as it will allow consumers to bring actions collectively where previously they may not have had the financial means to do so individually. However, it is almost certain that, once implemented, businesses will face increased litigation for breach of EU consumer law in the range of areas within the scope of the Directive.
For further information or to discuss, please contact Joe O'Malley jomalley@hayes-solicitors.ie or Laura Fannin lfannin@hayes-solicitors.ie at Hayes solicitors LLP
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About the Authors
Joe O'Malley
Joe is Managing Partner and Head of the Commercial Litigation & Dispute Resolution team at Hayes solicitors. He handles a wide variety of commercial disputes involving high value claims, complex issues and voluminous data for financial institutions and corporate clients.
Laura Fannin
Laura is a partner in the Commercial & Business team at Hayes solicitors. Laura advises clients on a diverse range of corporate and commercial matters and regulatory requirements. She is an experienced adviser on terms and conditions of sale and purchase, IT issues, data protection, product liability, advertising and promotions, intellectual property and a wide range of commercial agreements.