The Representative Action Directive (EU 2020/1828) (Directive) will alter Ireland’s litigation landscape. Currently, Ireland does not have a procedural mechanism for compensatory collective actions for consumer redress.
The Directive builds on the Injunctions Directive (2009/22/EC). It aims to protect consumers from unlawful practices by traders. The Directive will enable collective redress actions to be brought by qualified entities, on behalf of consumers, against traders for breaches of an expanded scope of EU law. Redress measures available under the Directive include compensation, repair, replacement, contract termination and injunctive relief. In addition to protections under general consumer law, the broad reach of the Directive is notable, covering data protection, financial services, energy and telecommunications. The Directive came into force on 24 December 2020. It must be transposed into Irish law by 25 December 2022 and will operate from 25 June 2023. You can access our previous article outlining the key features of the Directive here.
Earlier this year, the Department of Enterprise, Trade and Employment (DETE) sought submissions on the exercise of certain options under the Directive. Transposition of the Directive into Irish law will be challenging against a background of Irish rules on maintenance and champerty and the currently limited options under Irish law for class-action type proceedings, and the overarching requirement to ensure a balance between consumer and traders rights.
Qualified Entities (QEs)
The Directive provides for two types of QEs (i) QEs to bring cross-border representative actions (Cross-Border QEs) and (ii) QEs to bring domestic representative actions (Domestic QEs).
The Directive requires Cross-Border QE's to be independent, non-profit making bodies with no conflicts of interests between their funders and the consumers whose interests they protect.
The Directive grants discretion to member states in relation to Domestic QEs, however any criteria must comply with the Directive's objectives to make representative actions effective. Member states may require Domestic QEs to comply with the criteria necessary for Cross-Border QEs. They may also allow for ad hoc appointments in particular cases; may designate public bodies as Domestic QEs; and allow public bodies already designated under the Injunctions Directive to act as QEs in collective redress actions. In Ireland, the CCPC is the designated qualified entity under the Injunctions Directive.
It will be interesting to see the designation criteria for Domestic QEs that will be applied under the Irish transposing legislation. There are advantages and disadvantages in exercising the options available for the designation under the Directive. It is important that the body ultimately dealing with the designation process is suitably qualified and equipped to ensure compliance with the Directive and avoid any potential abuse.
Assistance for Qualified Entities
Member states must ensure that the costs of representative actions do not prevent qualified entities from exercising rights to seek redress and injunctive measures. Assistance measures proposed under the Directive include public funding, limitation of court fees and access to legal aid. Separately, the Directive provides for third-party funding (where allowed under national law) of representative actions where that funding complies with the requirements of transparency, independence and the absence of a conflict of interest.
Presently under Irish law, third-party professional funding of litigation is contrary to the rules of maintenance and champerty. There have been widespread calls for an overhaul of these rules because of their negative impact on access to justice. One such call for urgent legislative change came from the Chief Justice in SPV Osus Ltd v HSBC Institutional Trust Services (Irl) Ltd in July 2018. Mr Justice Clarke CJ expressed concern about cases where persons have suffered wrongdoing but are unable to effectively vindicate their rights because of the costs of going to court.
Ireland's obligation under the Directive to ensure costs do not impede consumer representative actions, together with the Directive's safeguards around funding of such actions by third parties, may instigate overdue changes to the litigation funding landscape in Ireland. Compliance with Ireland's obligation in terms of assistance for QEs may act as the catalyst for the Oireachtas to finally legislate for professional third party litigation funding.
Member states must establish rules on how and when individual consumers, concerned by a representative action, consent to being represented by the qualified entity and be bound by the outcome. In terms of Cross-Border actions, an 'opt-in' system will apply whereby member states must ensure consumers who are not habitually resident in the member state where the action is taken, expressly consent to partake.
The DETE consultation sought submissions on whether Ireland should introduce an 'opt-in' or 'opt-out' mechanism for consent. As noted by the Law Reform Commission, in its 2005 Report on Multi-Party Litigation, the constitutional right of access to the courts possibly involves a right of non-access to the courts. It is questionable whether an opt-out system of consent would align with this right as the litigant is automatically included in the action.
The opt-in system is deep-rooted in the Irish approach to litigation. Any sudden shift towards an opt-out system may be a source of distress for certain affected consumers. The issue of consent will not be straightforward, and many factors will have to be considered.
Implementation of the Directive will pioneer innovative changes to the litigation process in Ireland for consumers. However, the exercise of certain optional provisions under the Directive in Irish transposing legislation will not be without difficulty, as set out above. We will continue to monitor the progress of the Directive and the transposing legislation to ensure you are fully apprised of further developments.