The recent publication of the Representative Actions for the Protection of the Collective Interests of Consumers Bill has provided further clarity as to how collective consumer redress will operate in Ireland. Dispute Resolution partner, Peter Johnston reviews the scope of the Bill’s provisions and set out next steps for consumer-facing businesses in the financial services sector.
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 should be transposed into Irish law. The Directive creates a new regime for representative actions for the protection of the collective interests of consumers. Speaking at the launch, the then Minister for Trade Promotion, Digital and Company Regulation noted that there was a “significant job of work” to be done to design a suitable procedural mechanism for collective representative actions in Ireland.
The output of that work can largely be seen in the recent publication of the Representative Actions for the Protection of the Collective Interests of Consumers Bill 2023.
With the publication of the Bill in March 2023, 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.
The Collective Redress Directive was published on 4 December 2020. Ireland and the other Member States were required to adopt implementing measures by 25 December 2022, which the majority failed to do so, and the measures to apply from 25 June 2023.
The Directive and the Bill provide that the new law will apply to actions taken under 66 separate European directives and regulations. The net is cast wide to include a number of sectors including technology, health and financial services. For financial services regulation, these include:
- Distance Marketing of Consumer Financial Services Regulations
- Consumer Mortgage Credit Agreement Regulations
- Consumer Credit Agreements Regulations
- Cross Border Payments Regulations
- UCITS Regulations
Current avenues for consumers to bring proceedings against financial services entities are somewhat 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 Bill gives good insight into how the Directive will be transposed into Irish law.
The main features of the Bill 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. 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 forms of 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 Bill 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.
Having been published, the Bill is now subject to pre-legislative scrutiny by the Joint Committee on Enterprise, Trade and Employment, before it completes the remaining stages in the Dáil and the Seanad. 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.
Now that the Bill has been published there is further clarity on the precise provisions as to how consumer collective redress will operate in Ireland. It is clear that once the Bill 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. 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 large actions.
The Bill provides for third-party funding, “insofar as permitted in accordance with law” and that a qualified entity “shall disclose to the Court a financial overview that specifies the sources of funds used by it to support the representative action.” However, the Bill 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? The Minister for Justice has asked the Law Reform Commission to conduct a review of the law governing third-party funding of civil litigation in Ireland. The Commission is working on a paper and will report in 2024.
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.
For more information, please contact a member of our Dispute Resolution team.
The content of this article is provided for information purposes only and does not constitute legal or other advice.