The Representative Actions for the Protection of the Collective Interests of Consumers Bill 2023 (the “Bill”) was published on 13 March 2023. This legislation is due to come into effect in June 2023. It is landmark legislation that has the potential to fundamentally alter the litigation landscape in Ireland. Following the publication of the Bill (see our previous update here), this article considers its provisions and assesses the extent to which they are likely to impact consumer-facing businesses, once enacted.
As we have previously outlined, the purpose of the Bill is to give effect to the EU Representative Actions the “Directive”), which is intended to provide more consistent and effective remedies for mass breaches of consumer law.
A deadline of 25 June 2023 has been set for the new law to come into force. Assuming the Bill is signed into law by that date it will, for the first time, allow for collective domestic and cross-border actions on behalf of impacted consumers in relation to infringements of prescribed consumer legislation.
In our previous article on the General Scheme of the Bill (the “General Scheme”) here, we analysed the key provisions of the proposed legislation under various headings, which are reflected below. The Bill does not diverge significantly from the General Scheme. It has, however, provided further detail on how the procedure will operate. Significantly, the Bill does not offer a solution to the question of how representative actions of this nature will be funded in Ireland.
As under the General Scheme, the Bill provides that the new law will apply to infringements of wide-ranging provisions of EU law as transposed into national law. This is likely to arise in areas such as product liability, data protection, financial services, travel and tourism, energy, telecommunications and the environment.
The Bill has now made clear that the new regime will apply to "actions brought on or after 25 June 2023 in respect of infringements by traders occurring on or after that date". This provides welcome clarity as it has removed any suggestion (in particular arising out of the wording of the General Scheme) that the new legislation will have retrospective application to infringements that took place before the 25 June 2023 implementation deadline. However, it should be noted that so-called 'continuous infringements', which first took place some years ago but are continuing in a way that accrues a new cause of action every time the conduct occurs, may be caught by the new regime. It should also be noted that it may be attractive to bring class actions on a 'follow-on basis', by which we mean in reliance on a decision by a regulator that found an infringement, and, if so, there is likely to be a significant delay between the date of the infringement and the date of launch of a representative action under the new regime.
Notably, the Bill does not prescribe either a minimum number of consumers required to bring an action or the necessary degree of similarity between their claims in order for a representative action to be admissible. Section 3 of the Bill does, however, provide that the Minister for Enterprise, Trade and Employment (the "Minister") may make separate regulations for the purposes of the legislation and it is likely that such regulations will clarify these, as well as other, issues in the Bill.
The Bill, in line with the General Scheme, provides that domestic representative actions can only be brought by not-for-profit "qualified entities" ("QEs") designated by the Minister. What is clear is that, before a QE can even seek to bring a representative action, numerous criteria must be met in order to not just be designated as a QE but to be able to maintain that status.
In order to be designated as a QE, the criteria set out in the Bill are broadly the same as under the General Scheme and require an organisation to:
- Be a legal person with over 12 months of public consumer protection activity;
- Demonstrate, as its main purpose, a legitimate interest in protecting consumer interests under certain legislation prescribed in the Bill;
- Be non-profit-making and solvent;
- Be independent and have procedures in place to ensure it is not influenced by traders or other persons with an economic interest in bringing representative actions (including "for profit" litigation funders), the idea being to prevent abusive and opportunistic litigation; and
- Make publicly available certain information, including confirmation of their compliance with each of the above points, together with their source of funding, organisational structure, statutory purpose and activities.
The designation of QE's will be reviewed "at least once every five years" under the Bill (a change from the fixed five yearly review envisaged under the General Scheme) and may also be reviewed if compliance concerns are raised by another Member State or the European Commission.
Main Purpose Requirement
In addition to the designation requirement as to a QE's main purpose, the Bill has added a provision that the Court may examine whether the main purpose of a QE justifies it taking a particular representative action. This 'main purpose' requirement raises an interesting question as to whether a regulator may have a dual role where it can respond to non-compliance through two avenues: (i) pursuing the imposition of criminal or civil sanctions on the infringer, and/or (ii) pursuing a representative action to recover compensation for the consumers affected by the infringer's conduct. The answer to this question will depend on how the relevant regulator's statutory remit is interpreted. To the extent that a regulator is designated, another interesting question is whether they would, in taking a representative action, be obliged to adhere to the constitutional and fair procedures standards that apply to them in their enforcement role and, if not, what consequences follow.
As under the General Scheme, as part of an application by a QE to bring a given representative action, the Bill requires QE's to provide the High Court with details of how each representative action will be funded.
As with the General Scheme, the Bill provides for the imposition of a "modest entry fee", the maximum amount of which is to be prescribed by the Minister for Enterprise, Trade and Employment. However, the Bill expressly states that the fee imposed should not be at a level that discourages consumers from participating in an action. There remains a question mark as to whether this will be sufficient to represent a realistic source of funds for QEs.
In terms of third party funding, the Bill repeats the wording provided in the General Scheme - that third party funding is permitted only “insofar as permitted in accordance with law”. The funding of litigation by third parties continues to be prohibited in Ireland by the laws against maintenance and champerty and, whilst there are ongoing calls for those laws to be changed, a Law Reform Commission examination is awaited before there is likely to be any substantive progress. (See our previous insight here for further details.) So for the time being at least, it appears third-party funding will not be available to QE's.
On that basis and given that QE's must be non-profit organisations, what is described in the Government's report on the pre-legislative scrutiny of the General Scheme (the "PLS Report") as "the vast costs burden" continues to present a significant barrier to the effectiveness of the new legislation. By way of example, the Competition and Consumer Protection Commission ("CCPC") was identified in the PLS Report as possibly being designated as a QE in Ireland. However, it was specifically noted that, although the CCPC is currently resourced by the Government, the Government would not be covering the costs of any representative actions.
Consumer Remedies and Opt-in / Opt-out Rules
In line with the General Scheme, the Bill provides for QEs to apply for injunctive relief and/or redress measures. Both applications may be made at the same time and the High Court has been designated as the appropriate forum to hear such applications.
As with the General Scheme, consumers are not required by the Bill to specifically opt-in to applications for injunctive relief but are required to expressly opt-in to any application for redress measures and must pay the prescribed entry fee. The Bill has extended the period within which consumers may opt-in to the proceedings such that they will now be able to do so at any time until the case is deemed admissible by the High Court, where previously that was limited to the time before the trader entered an appearance.
The Bill also specifically states that consumers who have not opted-in to a representative action retain their right to bring their own separate action against the trader.
The collective redress mechanism is both domestic and cross-border in nature, meaning that QE's can be designated to launch representative actions for either a domestic action or a cross-border action (ie in a Member State other than the Member State in which it is designated). The Bill further provides that "more than one [QE] designated by different Member States" may bring a cross-border representative action together, in which case a lead QE should be identified.
This means that qualified entities who are designated in other Member States of the EU may apply to the Irish High Court to launch a representative action against a trader in Ireland. Whether proceedings can be brought in a given jurisdiction will depend on the application of the rules of the Recast Brussels Regulation, which governs the allocation of jurisdiction in and between the courts of different EU Member States. In some cases there will be a number of potential jurisdictions in which proceedings could be brought. This is particularly the case given the flexibility that the Recast Brussels Regulation rules give to consumers as to where they may bring their claims.
Where that is the case, one factor that is likely to be taken into account by qualified entities in deciding which jurisdiction to choose is the particular mass claims regime established in that jurisdiction. They are likely to look at the particular procedural rules the jurisdiction has put in place, particularly on issues where jurisdictions have flexibility so that there is likely to be a variety of approaches, such as around the availability of third-party litigation funding, certification procedures, and the scope of discovery. As a result, we can anticipate there will be forum-shopping within the EU in mass actions and certain ‘favoured’ jurisdictions may emerge.
For example, in relation to discovery, Article 18 of the Directive requires EU Member States to ensure that parties can seek disclosure of relevant evidence "in accordance with national procedural law". Section 34 of the Bill has closely transposed this provision, indicating that disclosure of evidence in Ireland will be made in accordance with rules of court. Whilst specific rules of court for representative actions have not yet been drafted, it is worth noting that Ireland has a broad discovery regime that requires parties to disclose relevant documents in a party's power, possession or procurement. This sets Ireland apart from civil law EU Member States, where discovery is not an ordinary feature of litigation and it is possible that this will make Ireland an attractive destination for cross-border representative actions.
Publication of Information
As well as satisfying the various designation criteria, as previously discussed in relation to the General Scheme, QE's are required by the Bill to publish, including on their website, information in relation to the representative actions they have brought, including the outcome of those actions. The Bill additionally provides that QEs are to give traders a list of the consumers who have opted in to the representative action.
In turn, traders will be required, at their own expense, to inform the group of consumers represented in the action of any final decisions or settlements reached within a set time limit and individually if necessary. Not only will this be potentially costly for businesses, but as identified in our previous article, it means that it is likely to be difficult to resolve disputes that have proceeded to redress stage in a discrete manner.
Overall, the Bill does not introduce any significant changes to the regime envisaged by the General Scheme and rather expands on the framework originally provided. There is little doubt that this Bill, once enacted, has the ability to change the Irish litigation landscape and open the gateway in Ireland to a novel form of consumer class action.
However, it will take time for QEs to become designated and, more significantly, the lack of availability of third-party funding will continue to present a significant barrier to the ability of QEs to bring a representative action in this jurisdiction. Court rules will also have to be updated to reflect this new procedure. Therefore, it may be a little more time before the legislation is commenced and floodgates open to mass claims in Ireland after the legislation is enacted (which we expect will be no later than 25 June 2023).
This does not mean, however, that Irish businesses can put off addressing the impact of the new legislation. Firstly, a representative action brought in the future will be based on infringements that took place from 25 June 2023 onwards. There is also the potential, as discussed above, for so-called continuous infringements to be caught by the new regime. In addition, given the consumer-friendly approach to jurisdiction in the EU, Irish businesses with a consumer base across the EU must be prepared to be the subject of a consumer representative action commenced in another Member State.
Appropriate preparatory action therefore needs to be taken by impacted Irish businesses now to reinforce their compliance and risk management processes.