Analysis: The introduction of class actions in Ireland

Analysis: The introduction of class actions in Ireland

Pictured (L-R): Andrew McGahey and Aoife Ryan

Andrew McGahey and Aoife Ryan of Kennedys examine the Representative Actions for the Protection of the Collective Interests of Consumers Bill 2022.

The EU Representative Actions Directive (EU) 2020/1828 is to be transposed into Irish law by 25 December 2022, with effect from June 2023. The Directive aims to improve consumers’ access to justice by introducing a standardized EU wide legal mechanism by which consumers, who are affected by the same alleged infringements of EU law, can bring a representative action – also commonly referred to as a collective or group action – for injunctive relief and/or redress.

The Irish government recently published its draft general scheme of the Representative Actions for the Protection of the Collective Interests of Consumers Bill 2022. Whilst the final legislation is likely to look somewhat different to the draft bill, it will nevertheless be novel, because there is no existing legislative framework or legal procedure in Ireland which provides for collective redress, or any form of group action akin to those available in other jurisdictions.

Against a growing trend of mass consumer led litigation across the globe, the scheme will inevitably have a pronounced impact on the Irish litigation landscape in the coming years.

Qualified entities

The draft bill provides that domestic and cross-border representative actions may only be brought by qualified entities (QEs) designated by the Minister for Enterprise, Trade and Employment. The scheme will operate as an “opt-in” system for consumers seeking redress measures, requiring consumers expressly to confirm their interest in being represented by the designated QE.

A domestic representative action is one in which a QE, the named claimant, brings a representative action in the courts of the member state where it is designated against a “trader”, the defendant. By contrast, a cross-border representative action is a representative action brought by a QE in a member state other than that in which the QE is designated.

The draft bill does not contemplate the Competition and Consumer Protection Commission (CCPC) taking on the role of designator (rather than the minister) or of a designated QE, notwithstanding that the CCPC is an established, independent and statutory body with a mandate to enforce competition and consumer protection law in Ireland on behalf of consumers. Whilst the CCPC would appear suitably qualified to perform both roles, the potential costs exposures to the CCPC and, in turn the state, may have been too unpalatable for those drafting the bill to contemplate.

It is unclear to what extent consideration was given to the “Quebec model”, where class litigation is funded by a central justice fund, fueled by contributions from each and every collective action that takes place in Quebec province. Adopting this type of model would not only equip the QE to fund an action, but could also help assure a trader who successfully defends the action that at least some of their costs could be met where a costs order is made in their favour.

Instead, the draft bill provides that the body seeking to advance a domestic or cross-border representative action is one designated a QE by the minister provided that it satisfies a set of stringent criteria.

Whilst the draft bill does not specify if designation is to be assessed by the minister or by means of self-declaration, one would expect the Irish government to produce guidance or regulations on what the designation procedure will entail. The minister will, however, need to ensure that the applying QE has measures in place to prevent persons from unduly influencing the QE, and that conflicts of interest between the QE, its funders, and the consumers are avoided.

Litigation funding

The draft bill anticipates that a representative action will be funded by a third party “insofar as permitted under Irish law…”, but provides that such party must not influence the course of the action. Third-party litigation funding is currently prohibited in Ireland. It can be inferred from the draft bill that the longstanding torts of ‘maintenance and champerty’ will need to be restricted to exclusively allow for funding of representative actions under the Directive. The Irish courts have made it clear that the abolition of these torts is a matter for the Irish parliament.

Should such third-party funding be permitted, it will be necessary for the minister to introduce a series of measures to protect the interests of traders and consumers, such as placing restrictions on the QE and/or the litigation funder to avoid conflicts of interest arising, and implementing appropriate and adequate safeguards to ensure traders are not the subject of litigation prompted by competitors.

A fertile ground for forum shopping?

There are distinctive features in the Irish legal system that make it an attractive jurisdiction for collective redress litigation. As well as being the only remaining common law system in the EU, its civil procedural rules, particularly those concerning the discovery and production of documents relevant to the issues in dispute, may be attractive to a QE bringing a representative action, in the hope that it will help them find “a smoking gun”. QEs are also likely to be encouraged by the often generous damages awards made by the Irish courts and the potential for it to recover legal costs on the “loser pays” principle.

Looking ahead

The Irish government will be due to debate the draft bill in Dáil Éireann, Ireland’s lower chamber of parliament, in the coming months. Undoubtedly, the Act transposing the Directive will look different to the draft bill, but it is likely that many of its fundamental elements will remain.

Whatever form the legislation ultimately takes, the transposition of the Directive will bring Ireland into line with other EU jurisdictions which already have established collective action mechanisms in place. More significantly, this new legislation will improve consumers’ access to justice and facilitate redress where collectively they have fallen victim to the same infringement of their rights, but to do that effectively, the torts of maintenance and champerty need to be abolished, and checks and balances need to be put in place, to ensure that the interests of consumers and traders do not become secondary to third parties.

  • Andrew McGahey is the regional managing partner for Kennedys EMEA and the managing partner of Kennedys’ Dublin office. Aoife Ryan is a senior associate.
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