Collective Litigation in Ireland: A Guide to the new Representative Actions Mechanism
On 11 July 2023, the Representative Actions for the Protection of the Collective Interests of Consumers Act 2023 (the “Act”) was signed into law. The Act will become operational once commenced by order of the Minister for Enterprise, Trade and Employment.
The purpose of the Act is to transpose Directive (EU) 2020/1828 on representative actions for the protection of the collective interests of consumers, repealing Directive 2009/22/EC (the “Directive”) and to provide for related matters.
Overview
The transposition of the Directive into Irish law paves the way for a new civil litigation mechanism through which representative actions can be brought on behalf of consumers for alleged infringement of their rights under relevant enactments. The relevant enactments include EU acts and provisions specified in Annex 1 of the Directive and legislative provisions specified in the Schedule of the Act.
The relevant enactments traverse a range of industries including financial services, travel and tourism, data protection, energy, telecommunications, environment, life sciences, healthcare and aviation.
What is a representative action under the Act?
A representative action is an action for the protection of the collective interests of consumers that is brought by a qualified entity acting as a plaintiff on behalf of consumers to seek injunctive relief and/or redress in respect of infringements by traders under the relevant enactments listed in the Schedule to the Act on or after 25 June 2023 that harm or may harm the collective interest of consumers.
The Act applies to both domestic and cross-border infringements and will also apply to infringements which have ceased before the representative action is brought or before the representative action is concluded. Cross-border representative actions are representative actions brought by a qualified entity in an EU Member State other than the Member State in which the qualified entity bringing the representative action is designated.
The Act expressly provides that it does not affect rules in the relevant enactments in so far as they establish contractual and non-contractual remedies available to consumers for infringements which fall within the scope of the Act.
Which court will have jurisdiction to hear representative actions in Ireland?
The High Court will have jurisdiction in Ireland to hear representative actions which fall within the scope of the Act.
From a procedural perspective, the Rules of the Superior Courts will need to be amended to implement the Act and accommodate this new type of litigation mechanism. In the Report of the Review Group on the Administration of Civil Justice published in 2020, the Review Group recommended that procedure for multi-party litigation should be provided for in rules of court rather than primary legislation, as court rules can be amended with greater ease than primary legislation.
Having regard to the scale and nature of representative actions and the underlying aims of this legal mechanism to promote consumer and business confidence, contribute to fairer competition and create a level playing field for traders operating in the internal market, it is conceivable that representative actions could be litigated in a discrete sub-division of the Commercial List of the High Court. However, the position will only become clear once the procedural Rules of the Superior Courts mapping out the practical application of the Act are published.
The High Court will assess the admissibility of any representative action brought by a qualified entity with reference to (1) the sources of funding of the representative action (2) the nature of the claim and, in particular, the nature of the alleged infringement and (3) the class or classes of consumers affected by the alleged infringement.
The Act provides that, in light of this information, the High Court may dismiss a representative action which appears to be ‘manifestly unfounded’. This is without prejudice to the High Court’s general discretionary power to dismiss an action in the course of the proceedings.
Who is eligible to be designated a qualified entity?
As noted above, representative actions, whether domestic or cross-border, can only be taken by qualified entities who must meet specified criteria in order to be designated as a qualified entity.
A “qualified entity” means a legal person or public body representing consumers’ interests which has been designated as such by the Minister for Trade, Enterprise and Employment (the ”Minister”) or a Member State (other than Ireland), as qualified to bring representative actions.
| Criteria for Designation of Organisations as Qualified Entities | |
|---|---|
| 1. | a legal person with 12 months of actual public activity in the protection of consumer interests; |
| 2. | its main purpose demonstrates that it has a legitimate interest in protecting consumer interests; |
| 3. | of a non-profit-making character; |
| 4. | has not been declared insolvent or subject to insolvency proceedings; |
| 5. | independent and not influenced by persons other than consumers; and |
| 6. | have made available information publicly that shows:
a. it complies with (1) – (5); and b. the sources of its funding, its organisational, management and membership structure, its statutory purpose (if any) and its activities. |
A register of qualified entities will be publicly available on a website maintained by the Minister. The European Commission will also maintain a list of designated qualified entities. An entity that is on this list can use this as proof of legal standing to bring a cross-border representative action seeking an injunction or redress measures before the Irish Courts.
A designated qualified entity has information obligations and must publish information relating to the representative actions that it has brought before the High Court or other Member States, including information relating to the status and outcome of those representative actions.
A designation as a qualified entity is subject to Ministerial review, at least every 5 years, to ensure that the qualified entity continues to satisfy the designation criteria. A review will also be undertaken if concerns are raised by another Member State or the European Commission regarding compliance with the designation criteria under the Directive, which mirror the criteria outlined in the Act.
A designation as a qualified entity can be revoked for various reasons including a failure to comply with an information obligation or any designation criteria.
A defendant trader can also raise justified concerns to the High Court if they have concerns as to whether a qualified entity complies with the designation criteria.
In any representative action brought, the qualified entity will be the plaintiff in the action, with all of the existing rights and obligations associated with that position. In Ireland, the Rules of the Superior Courts confer a range of rights and obligations on parties, including plaintiffs, such as the right to request discovery. There is also a right to request interrogatories with leave of the High Court. For cases in the Commercial List of the High Court leave is not required.
Can more than one qualified entity bring a representative action?
Yes, more than one qualified entity designated by different Member States can bring a representative action if an alleged infringement affects or is likely to affect consumers in more than one Member State, in order to protect the interests of those consumers. Where this arises, the qualified entities will have to nominate one qualified entity to lead the conduct of the representative action and inform the High Court accordingly. Each of the qualified entities will be bound by the outcome of the representative action.
What is the role of the consumer in initiating a representative action?
A consumer must request to be represented by a qualified entity in a representative action seeking redress before the case is deemed admissible by the Irish High Court. Conversely, there is no such obligation for consumers to opt-in to applications for injunctive relief. This disparity in approach was highlighted in the Pre-Legislative Scrutiny Report which recommended that both avenues of redress should be the subject of opt-in provisions. However the Act maintains the approach that a consumer does not have to opt-in to applications for injunctive relief.
What relief can be claimed in a representative action?
A qualified entity may seek either injunctive relief and/or redress measures.
Injunctions
| Requirement for Prior Engagement |
|---|
Before any application for injunctive relief to the High Court, a qualified entity must demonstrate efforts to engage in prior consultation with the trader the subject of the proposed representative action in an effort to resolve the alleged infringement, before escalating the matter to litigation. In particular, the qualified entity must:
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If, after consultation, or after reasonable efforts are made to enter into consultation or if the trader concerned has refused to participate in the consultations, the qualified entity is of the opinion that the trader has continued to act in a manner that constitutes an infringement and a period of two weeks has elapsed since a request to enter consultation has been made, the qualified entity can proceed to bring a representative action before the Court seeking injunctive relief. The two week period can be extended by mutual agreement between the qualified entity and the trader if they consider the extension would assist in resolving the infringement. A qualified entity can engage an Alternative Dispute Resolution entity within the meaning of the European Union (Alternative Dispute Resolution for Consumer Disputes) Regulations 2015 (S.I. No. 343 of 2015) to resolve the alleged infringement.
| Procedural Overview |
|---|
An application for injunctive relief will be brought by way of motion and the Court may grant:
When seeking an injunction, the qualified entity is not required to either prove actual loss or damage on the part of an individual consumer affected by the alleged infringement or intent or negligence on the part of the trader the subject of the application for injunctive relief. |
Redress Measures
No Requirement for Prior Engagement
Unlike an application for injunctive relief, there is no requirement under the Act for prior engagement before a qualified entity seeks to admit a representative action seeking redress to the High Court. In Ireland, however, the Mediation Act 2017 obliges solicitors to advise their clients to consider mediation prior to issuing proceedings. The Act also provides that a court may, whether on the application of a party to the proceedings or of its own accord, invite the parties to the proceedings to consider mediation to resolve their dispute.
Consumer Opt-In Requirement
In a further point of distinction between applications for injunctive relief and redress, there is, as noted above, an opt-in mechanism for consumers in respect of representative actions seeking redress measures.
A consumer who is ordinarily resident in the State or habitually resident in another Member State and who has been affected by an alleged infringement by a trader can request to be represented by a qualified entity in a representative action for redress against that trader for the alleged infringement. This request can be made at any time up until the case has been deemed admissible by the High Court.
Subject to a cap to be determined by the Minister, a qualified entity can charge a modest fee to a consumer who requests to be represented in a representative action for redress.
The consumer will be required to sign a declaration provided by the qualified entity confirming that they have not previously received compensation from the same trader for the same cause of action and that they have been informed that receiving compensation in relation to the representative action concerned will preclude them from receiving any other compensation from the same trader for the same cause of action. If a representative action is deemed admissible the qualified entity must disclose a list of the names of consumers who have requested to be represented in the representative action and who have signed the declaration. At the end of a representative action, the qualified entity must provide the trader with a list of the names of the consumers who are eligible for redress.
The qualified entity must then keep the consumer informed of any decision made by the High Court concerning the admissibility of the representative action or the outcome of the determination of the admissibility of the representative action. Once the request has been made by the consumer and any associated entry fees requested by the qualifying entity discharged, the consumer:
- is bound by the outcome of the representative action;
- cannot be represented in any other representative action with the same cause of action against the same trader; and
- cannot bring an action individually with the same cause of action against the same trader.
Any consumer who has not requested that the qualified entity represent them will not be entitled to benefit from any redress measures granted by the Court in respect of that representative action.
A qualified entity will be required to collate and provide the Court with, information concerning the class of consumers entitled to benefit from the redress measures.
| What redress measures will be available under the Act? |
|---|
Without prejudice to the High Court’s discretionary powers in relation to redress, the Court may require a trader to provide a consumer with one or more of the following redress measures:
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It will not be necessary for the impacted consumers to bring separate actions to benefit from any of the redress measures ordered by the High Court in a given representative action. If the Court order for redress does not state the individual consumers entitled to benefit from the remedies provided by the order, the Court will identify and include in the order generally the class or classes of consumers entitled to benefit from those remedies. The High Court will also determine the period within which an individual consumer can avail of any redress measure ordered by the High Court.
Once the High Court has made its findings, the obligation then rests with the qualified entity to inform the consumers it represents of any redress measures ordered by the Court and how they can benefit from those redress measures. The Act makes clear that those consumers will not have to bring a separate action to benefit from any such redress measure.
The redress measures that may be ordered in a representative action are without prejudice to any additional remedies available to consumers under any enactment or European acts which were not the subject of that representative action.
Settlements
A qualified entity and a trader may, in a representative action for redress measures, jointly propose to the Court a settlement regarding redress for the consumers represented in that action. The Act also provides that the High Court may invite the parties to reach a settlement regarding redress within a reasonable time limit.
A settlement reached at either the instigation of the parties or the High Court must be approved by the High Court. The Court will not approve a settlement that appears to the Court to be unfair. If approved, the settlement will bind the trader, the qualified entity and the individual consumers it represents in the action.
Any redress measures provided through a settlement are without prejudice to any additional remedies available to consumers under any enactment or European acts which were not the subject of that settlement.
The Act is silent on settlement in respect of applications for injunctive relief.
Who will pay the costs of a representative action?
The Act mirrors the general rule that costs follow the event, namely that the unsuccessful party will pay the costs of the successful party. The default position is that, in the event that the representative action is unsuccessful, any award of costs made will be against the qualified entity only while individual consumers, save for exceptional circumstances, will not be liable to pay the costs of the proceedings. A successful party will be able to recover the costs relating to the provision of information to consumers for the purposes of the representative action.
How will representative actions be funded?
As noted above, the Act provides that a qualified entity can charge a modest fee to consumers who request to be represented in a representative action for redress. There is no equivalent provision in respect of representative actions for injunctive relief.
The Act provides that a representative action for redress may be funded by a third party “insofar as permitted in accordance with law“.
Where a representative action is funded by a third party, the High Court is required to ensure that conflicts of interest are prevented and that funding by third parties who have an economic interest in the bringing or outcome of the representative action for redress, does not operate to divert the representative action from the protection of the collective interests of consumers.
In this regard the Act requires the High Court to ensure (1) decisions of qualified entities are not unduly influenced by a third party in a manner detrimental to the collective interests of the consumers represented and (2) the representative action is not brought against a competitor of the funding provider or a party on whom it is dependent.
The qualified entity will be required to disclose to the High Court where the representative action is funded by a third-party and any justified doubts in respect of the legitimacy of the funding will be assessed by the Court. This assessment may result in a requirement to refuse the third-party funding or indeed refusal of the application to bring the representative action. The refusal of a qualified entity to bring a representative action will not affect the rights of the consumers represented to pursue other remedies.
While the foregoing provisions are of assistance in clarifying the various safeguards that are in place when a representative action seeking redress is funded by a third party, the Act does not alter the current position in Ireland that litigation funding, save for limited exceptions, is not permitted. As outlined in our previous briefing, the resolution of this position was identified by the Joint Committee on Enterprise, Trade and Employment in its Report on the Pre-Legislative Scrutiny of the General Scheme of the legislation as a key issue, in order to give full effect to the transposition of the Directive in Ireland. During parliamentary debate, as the Bill passed through the Oireachtas (Irish Houses of Parliament), the Minister of State at the Department of Enterprise, Trade and Employment acknowledged that “the limitation on access to funding for civil litigation in Ireland is likely to discourage some not-for-profit organisations from stepping forward to seek designation as a qualified entity”.
Whilst the importance of reform of Ireland’s position on third party funding is well recognised, a review of third-party funding of civil litigation in Ireland by the Law Reform Commission is ongoing with a report due in 2024. On 17 July 2023, the Law Reform Commission published a consultation paper seeking submissions from interested parties on third-party funding with contributions requested by 3 November 2023. Accordingly, any substantive policy review on third party funding will await the outcome of the report findings. The Minister has committed to maintaining pressure on the Department of Justice to procure the Law Reform Commission final report and to engage quickly with the Department of Justice on how to implement the report findings to ensure that the Act works optimally. The Minister has expressly committed to return to the Joint Committee to update them on progress made in this regard.
What happens next?
The Act will become operational once commenced by order of the Minister for Enterprise, Trade and Employment.
We will continue to monitor developments and will provide a further update once the Act is commenced.
In the meantime, if you would like to discuss any of the matters covered in this update in more detail, please get in touch with any member of our Litigation, Dispute Resolution and Investigations Group.
