The Department of Enterprise, Trade and Employment launched a public consultation in March 2021, seeking submissions as to how certain aspects of the EU Directive 2020/1828, which looks at representative actions for the protection of the collective interests of consumers, should be transposed into Irish law. Speaking at the launch, the Minister for Trade Promotion, Digital and Company Regulation noted that there was a “significant job of work” to be done to design the procedural mechanism for collective representative actions required by the Directive.

The output of that work can largely be seen in the recent publication of the General Scheme of Representative Actions for the Protection of the Collective Interests of Consumers Bill 2022 (the Scheme).

With the publication of the Scheme, Ireland takes one step closer to consumer class actions. The question is how will it impact consumer facing business?

The current position

Ireland has always been a good place to have a dispute. One area where Ireland has lagged behind other EU jurisdictions is in the area of class actions, and in particular collective consumer redress. That historic position is about to change.

EU Directive 2020/1828 on representative actions for the protection of the collective interests of consumers (Directive on representative actions) was published on 4 December 2020. Ireland and the other Member States are required to adopt implementing measures by 25 December 2022 and the measures will apply from 25 June 2023.

The Directive and the Scheme provide that the new law will apply to actions taken under 66 separate European directives and regulations. The net is cast wide to capture several sectors including:

  • The General Product Safety Directive
  • The Digital Content Directive
  • The Sale of Goods Directive
  • The GDPR
  • The Directive on liability for defective products
  • Medical Devices Regulations, and
  • EU Regulations on medicinal products for human use

Current opportunities for consumers to bring proceedings against a manufacturer of goods or a digital service provider are limited, expensive and time-consuming, with limited potential benefit in terms of compensation by the end of the process. However, once Member States have applied the measures of the Directive on representative actions, this is likely to greatly increase the enforcement of consumer rights across the EU.

The recent publication of the Scheme gives good insight into how the Directive will be transposed into Irish law.

The Scheme

The main features of the Scheme are as follows:

  • Qualified entities: Each Member State can designate at least one “qualified entity” to bring actions on behalf of consumers. Private law firms cannot bring an action. While further detail is awaited, in general terms a qualified entity must be a non-profit organisation in the area of consumer protection, be independent, and have a legitimate interest in ensuring the provisions of the Directive are complied with
  • Consumer redress: Qualified entities can apply for injunctive relief and other redress with injunctions potentially being granted on a preventative or prohibitive basis. Consumers do not have to opt-in to representative actions for injunctive relief. Consumers must however expressly opt-in to the representative action for monetary redress
  • Cross-border actions: A number of qualified entities can come together to bring cross border actions, which are on an opt-in basis
  • Statute of Limitations: Notably, limitation periods are suspended while the injunction is being determined to ensure that consumers’ rights to proceed to redress are preserved
  • Costs: Qualified entities must bear the cost of any action brought under the Scheme and costs of the action will be borne by the unsuccessful party; the loser pays principle. There is a provision for a partial costs order to be made against individual consumers if their intentional or negligent conduct results in a party incurring costs
  • Publication: Any settlement reached between the parties, after the injunction phase, must be approved by the court. A qualified entity is also required to publish information on its website on the outcomes of the representative actions it has brought

Next steps

Having been published, the Scheme is now subject to pre-legislative scrutiny by the Joint Committee on Enterprise, Trade and Employment. Once complete, the Bill will be formally drafted and subject to the usual processes before ultimately being signed into law by the President. The Directive requires that the new law will apply from 25 June 2023.

Once the Bill is published there will be further clarity on the precise provisions as to how consumer collective redress will operate in Ireland. It is clear that once the Directive / Scheme becomes law in Ireland, it will present a profound change in the rights available to consumers.

What is not yet clear is how qualified entities will fund actions under the Scheme. Where costs are awarded under the loser pays principle, the question remains how qualified entities, who are not-for-profit organisations, will be able to fund such potential large actions. The Scheme does not alter the long-standing position under Irish law prohibiting the funding of litigation by third parties who have no interest in the dispute. The question remains how will Irish qualified entities fund large scale consumer redress actions?

Leaving aside the current non-availability of litigation funding in Ireland, the cross-border nature of the new regime will be of particular relevance to businesses. This is because qualified entities can potentially come together to bring cross border actions in Member States where third party funding is available.