EU Collective Redress Regime - A new dawn for class actions in Ireland?

A directive allowing for representative actions for the protection of the collective interests of consumers (the “Directive”) has been published by the EU Parliament. This Directive allows qualified entities in Member States to bring national and cross border European representative actions on behalf of consumers. 

The Directive seeks to improve consumers’ access to justice. Qualified Entities (such as a consumer organisation or an independent public body) will be able to bring collective actions on behalf of large numbers of consumers who have suffered the same legal harm. The Directive covers a broad range of EU directives and regulations, making the collective redress regime far-reaching and an important development for EU consumer protectionism. 

The implementation of the Directive and the ability to bring these collective actions under Irish law is welcome as there are currently no such parallel procedures in existence. 

The Directive is due to be transposed into Irish law on 25 December 2022 and is to become operational in 2023. On 15 March 2021 the Minister for Trade Promotion, Digital and Company Regulation, Robert Troy TD, formally launched a public consultation to seek views of interested parties on the implementation of the Directive in Ireland¹. 

The Directive will implement a number of key changes on consumer redress within the EU: 

• Scope of the Directive: The Directive is wide-ranging, making it possible to bring representative actions for infringements of a number of areas of EU law including general EU consumer law as well as EU rules covering e-commerce, financial services, travel (air, rail, sea etc.), energy, telecommunications and geo-blocking etc.

Whilst the Directive provides consumers with a representative action mechanism across a wide-range of EU laws, the Directive also expressly acknowledges that consumers can separately rely on other legal remedies available to them in those same areas of EU law².  

• Qualified Entities: The Directive will designate representative actions to be brought through Qualified Entities only. Member States are required to designate at least one Qualified Entity possessing the power to bring collective action cases on behalf of consumers. For domestic representative actions, a Member State will have some discretion as to the criteria to be used to identify a Qualified Entity. For cross border representative actions the Directive establishes a set of criteria for a Qualified Entity. 

A Qualified Entity must³:  

• Be a legal person that is constituted in accordance with national law of the Member State and can demonstrate 12 months of actual public activity in the protection of consumer interests prior to its request for designation; 
  
• Have a statutory purpose demonstrating it has a legitimate interest in protecting consumer interests; 
  
• Have a non-profit making character; 
  
• Be independent and not influenced by persons other than consumers, in particular by traders who have an economic interest in the bringing of any representative action; and 
  
• Make publicly available an endorsement that it complies with the criteria as set out by the Directive and information regarding its funding, organisational, management and membership structure. The Directive places particular importance on this information being set out on the Qualified Entity’s website.

• New Consumer Agenda: The Directive forms part of a series of instruments being adopted by the European Commission’s “New Consumer Agenda” which seeks to harmonise redress and enforcement of consumer protection legislation in circumstances where an infringement occurs not only in one Member State, but also across Europe. 

• Opt-in/Opt-out: Member States are afforded flexibility in transposing the Directive into domestic law. Member States will be able to choose whether consumers actively opt-in to being represented by a Qualified Entity (requiring express consent from an individual) or whether consumers opt-out of the process (requiring confirmation to not be represented by a Qualified Entity, failing which, a consumer will automatically be represented in an action). The EU’s preferred approach is for adoption of the opt-in process which seeks to respect consumer freedom of choice. 

• Representative Actions: Qualified Entities will be able to apply for two types of relief, injunctive measures and redress measures through a representative action⁴: 

• Injunctive measures: A Qualified Entity can seek a provisional or a definitive measure to cease a practice or, if appropriate, to prohibit a practice, where the practice would constitute an infringement of EU law. When an injunctive measure is being sought, the Qualified Entity will not be required to prove actual loss or damage on the part of the individual affected consumers or intent/negligence on the part of the trader.
• Redress measures: These measures will require a trader to provide affected consumers with redress covering compensation, repair, replacement, price, reduction, contract termination or reimbursement of price paid, as available and appropriate under EU or national law. 

• Funding: The Directive encourages transparency of the origins of third party funding. Qualified Entities will be required to publicly disclose information regarding their funding. Additionally, where a representative action for redress measures is funded by a third party (insofar as is in accordance with national law), the Directive requires that conflicts of interest should be prevented. 

Qualified Entities must ensure that (1) representative actions are not unduly influenced by a third party which is detrimental to the collective interests of the affected consumers and (2) the representative action is not brought against a defendant that is a competitor of the funding provider or against a defendant on which the funding provider is dependent⁵. It remains to be seen how Ireland will deal with the principle of third funding post implementation of the Directive, as third party funding is not currently permitted in the jurisdiction. 

• Allocation of Costs: The Directive implements the “loser pays” principle deemed as a safeguard measure to stave off vexatious, frivolous legal actions. Member States must ensure that the unsuccessful party in an action is required to pay the costs of the proceedings borne by the successful party. Individual consumers concerned by a representative action for redress measures will not be required to pay the costs of the proceedings, save in exceptional circumstances⁶. 

The Directive introduces a number of safeguards for future EU representative actions to prevent abuse of process. By way of example, under the Directive, national courts will possess the authority to dismiss manifestly unfounded cases. Further, the commencement of representative actions are streamlined through Qualified Entities and the “loser pays” principle will determine the issue of costs. 

The Directive is an important development and the first of its kind to be implemented in Ireland.  Its aim is to harmonise the enforcement and protections available to consumers in Ireland and the EU. The modernisation of representative actions in Ireland is an important milestone and will establish this jurisdiction as an attractive dispute resolution centre for collective actions. 

For further information, please contact Mark O’Shaughnessy or Tanya Cotterell from the ByrneWallace LLP Litigation & Dispute Resolution Team or your usual ByrneWallace LLP contact.

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