by Matthew Austin , Laura Fannin August-10-2023 in Commercial & Business
Update on Collective Redress for Consumers
Representative Actions for the Protection of the Collective Interests of Consumers Act 2023 signed into law by the President.
As previously discussed in our article “Collective Redress for Consumers”, the Directive on Representative Actions for the Protection of Consumers 2020/1829 (“the Directive”) came into force on 20 December 2020. The Directive was required to be transposed by Member States by 25 December 2022 and to come into effect from 25 June 2023. In Ireland, the Representative Actions for the Protection of the Collective Interests of Consumers Act 2023 (“the Act”) transposes the Directive and was signed by the President on 11 July 2023 after being passed by both Houses of the Oireachtas on 4 July 2023. The Act has not yet been commenced.
The Directive
As a reminder, the Directive aims to establish a mechanism for collective redress legal proceedings in national courts for consumers who have suffered loss due to the actions of traders who have breached EU Law. These actions will be brought by “qualified entities” on behalf of consumers. These representative actions will cover both domestic and cross border infringements and furthermore consumers will be able to avail of injunctive relief or redress measures, or both.
In terms of funding the legal costs associated with the representative action, the Directive allows for third party funding “insofar as permitted in accordance with law”. It does not change the general position in Ireland that third party funding of litigation is prohibited. How this will play out remains to be seen.
Qualified Entities
Qualified Entities must meet the following criteria:
- It is a legal entity and can demonstrate 12 months of actual public activity in the protection of consumer interests prior to the application,
- Its main purpose demonstrates that it has a legitimate interest in protecting consumer interests;
- It has a non-profit-making character,
- It is not the subject of insolvency proceedings and has not been declared insolvent,
- It is independent and is not influenced by persons other than consumers, in particular by traders, who have an economic interest in the bringing of any representative action, including in the event of funding by third parties, and, to that end, it has established procedures to prevent such influence as well as to prevent conflicts of interest between itself, its funding providers and the interests of consumers, and
- It makes publicly available in plain and intelligible language by any appropriate means, in particular on its website, information that demonstrates that it complies with the matters referred to in paragraphs (a) to (e) and information about the sources of its funding in general, its organisational, management and membership structure, its statutory purpose (if any) and its activities.
It was previously suggested that the Competition and Consumer Protection Commission (CCPC) might be designated as a qualified entity. This has not yet been confirmed. Each EU Member State is to provide a list of its qualified entities to the European Commission by 26 December 2023.
Any fees to be paid to the qualified entity from the consumer for their services are to be prescribed by the Minister. However, they are to be “modest”.
Redress Measures
An opt-in system is to be used for redress measures. This means that the consumer must notify the qualified entity that they wish to be represented in a particular representative action for redress measures. The consumer may opt in at any time up until the point when the case has been deemed admissible by the Court. Once notified, the consumer is entitled to benefit from any redress granted.
Injunctions
The opt-in system does not apply to injunctive relief. If the consumer wishes to apply for an injunction, they do not need to notify the qualified entity. The qualified entity can apply for an injunction without any specific notice from the consumer. However, if the qualified entity is seeking injunctive relief they must first engage in prior consultations with the trader in order to provide them with an opportunity to cease the infringement.
Statute of Limitations
The Act sets out that the clock will stop for the purpose of the Statute of Limitations when the Court deems the action admissible. The clock is stopped until 60 days after one of the following happens, whichever first occurs:
- the representative action is dismissed by the Court,
- the qualified entity has notified the Court that it has withdrawn the representative action,
- the Court has made an order for an injunction,
- the Court has made an order for a redress measure, or
- the Court approves a settlement in the representative action.
Third Party Funding
The Act states that where a representative action is funded by a third party, insofar as permitted by law, the Court will first ensure that conflicts of interest are prevented. Secondly, the Court will ensure that, where the third party has an economic interest in the bringing, or the outcome of, the representative action, this does not divert the representative action from the protection of the collective interests of consumers. Furthermore, the Act states that the qualified entity shall disclose a financial overview to the Court of funds used to support the representative action.
However, as is the case with the Directive, the Act does not address the general position in Ireland that third party funding of litigation is prohibited, so it remains to be seen how exactly the question of funding of representative actions will be dealt with.
The Law Reform Commission (“the LRC”) recently published a report on Third-Party Litigation Funding in Ireland. The report sets out a number of model regimes for third-party funding. The LRC states that, other than an entirely new regulator, Court Certification would be the most in line with the requirements of the Directive. The Court Certification model places the court as a regulator. The court would oversee the sector on an individualised basis. The LRC explained that this model is consistent with the Directive because the Directive contemplates that the issue of funding will be addressed at an early stage. Furthermore, the Directive requires Member States to empower courts to reject the legal standing of the qualified entity in a specific representative action. Therefore, the issue of funding can be seen as an element of the courts’ general supervisory jurisdiction over representative actions.
The LRC further stated that, for third party funding in general in Ireland, a combination of models will be needed.
EC-REACT - Online Platform
Additionally, the European Commission launched an online platform called EC-REACT or The Representative Actions Collaboration Tool. This platform is designed to allow information on representative actions to be exchanged across the Member States. Member States will be able to use this platform to notify the European Commission of their designated qualified entities and submit reports on the functioning of representative actions.
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About the Authors
Matthew Austin
Matthew is a partner in the Commercial & Business team and has considerable expertise in a range of practice areas, having acted for Irish and International clients in domestic and multi-jurisdictional issues. Matthew has advised in civil and administrative law disputes and in regulatory and advisory matters including insolvency/restructuring, IP, defamation and media law, competition and consumer protection and data protection.
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.