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Consumer Representative Actions: Are you ready?

Matheson held a Knowledge Insights Series event on 16 May 2023 on the Representative Actions for the Protection of the Collective Interests of Consumers Bill 2023 (the "Bill").  During this webinar, a cross-departmental panel of Matheson partners, including; Julie Murphy O-Connor, Michael Byrne and Kate McKenna, were joined by Kieran O'Callaghan, Deputy Director of the Consumer Protection and Product Safety Division of the Competition and Consumer Protection Commission (the "CCPC") and  Marit Bosselaar, class actions specialist at Loyens and Loeff Amsterdam, to discuss the practical implications of the Bill for Irish consumer-facing businesses. 

You can read more about the Bill, which is due to be enacted later this month, in our previous publications here.

Background

In 2020, the European Union issued EU Directive 2020/1828 on Representative Actions (the "Directive").  The Directive obliged all EU Member States to amend their respective national rules of civil procedure to allow qualified entities to bring collective actions for a class of consumers with effect from 25 June 2023. 

The EU Member States were afforded considerable leeway in terms of how to transfer the Directive’s broad requirements into their national legal systems.  Although there will therefore be differences of approach between the individual Member States, for the first time, all of Europe will have some form of collective redress to allow consumers to directly claim compensation from a defendant. 

The Netherlands provides a useful insight into what the future may look like in Ireland, as it has already had legislation permitting class actions for some time.  In particular, the Dutch parliament passed its class action legislation in 2020, known as the "WAMCA" (the Act on Resolution of Mass Damages in Collective Actions).  Only minor changes have been made to the WAMCA in order to comply fully with the new EU Directive.  Indeed, the EU Directive was based largely on the WAMCA, making it an interesting case study.

The Bill

Julie Murphy-O'Connor, partner in Matheson's Commercial Litigation and Dispute Resolution department, began by explaining that there is no court process for collective actions or class actions available in Ireland at present.  Anybody seeking redress for a wrong has to bring their own proceedings against the wrongdoer under a separate cause of action.  The Bill introduces for the first time a tool to allow mass claims to be brought in Ireland on behalf of consumers as a whole. 

Michael Byrne, partner in Matheson's Commercial Litigation and Dispute Resolution department discussed how the Bill is likely to work in practice.  He highlighted that, although under the new framework claims must be brought by a qualified entity, it is not yet clear which body or bodies will act as a qualified entity in Ireland.  Qualified entities have to be designated as such by the Minister for Enterprise, Trade and Employment and the list of criteria that have to be met is to be found in section 8 of the Bill. 

Key among those criteria is that the qualified entity has to be independent.  Further, it has to have a non-profit-making character and have at least 12 months of actual public activity in the protection of consumer interests prior to making the application to be designated as a qualified entity.  There is no upper limit to the number of bodies that can be designated as qualified entities but in order for the legislation to operate properly there will have to be at least one qualified entity designated as such in Ireland.  Qualified entities are also able to bring cross-border actions in EU Member States other than the EU Member State in which they are designated, and an EU-wide register will be maintained of all designated qualified entities in Europe.  Such cross-border actions will arise following infringement of relevant consumer-facing legislation where impacted consumers are domiciled across different EU Member States.  It will, therefore, be possible for qualified entities outside of Ireland to bring representative actions in Ireland on behalf of Irish consumers and consumers in other EU Member States.  As provided for by the Directive, Ireland has adopted an "opt-in" system for damages claims and an "opt-out" system for injunctive relief.

Role of the CCPC

Kieran O'Callaghan explained that the CCPC is the statutory body responsible for promoting compliance with and enforcing competition and consumer protection law in Ireland.  Its aim is to improve consumer welfare in Ireland and it oversees the enforcement of over 40 pieces of consumer legislation.  The CCPC has significant civil enforcement and criminal prosecution powers and the Bill does not change the mandate or powers of the CCPC. 

Kate McKenna, partner in Matheson's Competition and Regulation group, discussed how the CCPC's role as enforcer could potentially present challenges to regulatory bodies assuming the role of a qualified entity for the purposes of this new legislation. 

Challenges with the Bill

Apart from there being no designated qualified entities in Ireland as yet, Julie and Kieran discussed that another fundamental challenge to the successful operation of the new legislation will be the lack of availability of third party litigation funding in Ireland.  We have written about the challenge this presents previously here

As litigation funding for profit by unconnected third parties is illegal in Ireland under maintenance and champerty rules, this will limit the ability of qualified entities to fund representative actions unless the circumstances of the qualified entity are such that they can self-fund.  In September 2022, the European Parliament adopted a resolution on the responsible private funding of litigation recommending to the European Commission that, after the Directive becomes operational on 25 June 2023, a new directive should be proposed to establish common minimum standards for third-party litigation funding across the EU.  This initiative may, in time, prove to be a driver for change in this area. 

Ireland as the Jurisdiction of Choice in Cross-Border Actions 

For qualified entities considering where to bring a representative action with a cross-border dimension, Michael explained that the advantages and disadvantages of a given jurisdiction need to be weighed in the balance.  In Ireland's favour is the fact that it has a developed discovery regime that is part of the litigation process.  This may well be more significant now that Ireland is the only remaining common law system in the EU.  Also, Irish courts are perceived as being generous by comparison with other EU jurisdictions when awarding damages.  Furthermore, the fact that English is the language used by the courts in Ireland could well be a factor that weighs favourably in the balance in Ireland's favour as a choice of jurisdiction.  Against these advantages, the most significant challenge is the prohibition on third party legal funding.  The fact that Ireland has adopted an "opt-in" regime may also make Ireland less attractive as it will make it more difficult to organise the critical mass of claimants necessary to make a claim worthwhile.  However, it is possible that businesses based in Ireland selling into other EU Member States will be involved on a cross-border basis in litigation brought in another Member State.

The Regime in the Netherlands

Marit Bosselaar, lawyer with Loyens & Loeff, explained that, although the WAMCA was introduced in 2020, the Netherlands has a sophisticated system for class actions which dates back to the 1990s.  Unlike the position in Ireland, litigation funding is allowed, subject to various prescribed requirements, although the implementation of the Directive has required the introduction of new rules on litigation funding that prohibit funding from a competitor of the defendant(s).

Since the introduction of the WAMCA in the Netherlands there has been a significant increase in the number of class actions coming before the Dutch courts against Dutch companies, but also against companies from other jurisdictions, including Ireland.  However, the cases are taking a long time to progress with many preliminary issues arising that need to be dealt with, and there has not yet been a case to reach the assessment of damages stage.  The WAMCA and the implementation of the Directive will be evaluated further in two years' time, so there may be more tangible information about the success of the procedure and any changes required to the legislation at that point.

Possible Future Areas of Litigation

Looking to the future of representative actions under the Directive, Michael pointed out that there are 66 different EU regulations and directives listed in the Schedule to the Bill under which claims of this kind can be brought.  Sectors in scope include product liability and safety, data protection, financial services, energy, telecommunications, food safety, travel and tourism, and general unfair terms and consumer contracts.  Kate added that follow-on competition actions are likely to be an immediate area of interest for representative actions, as a breach of EU law will already have been established.  Julie explained that ESG is also likely to be an area where these sorts of claims will be brought, with Marit indicating that climate interest groups can become qualified entities and that this is an area that has gained considerable traction in the Netherlands.

Any companies that deal with consumers will need to be aware of this legislation and understanding their obligations will be key to limiting their risk of exposure to representative actions.

For further information on how the Bill may affect your business, please contact Commercial Litigation and Dispute Resolution partners, Julie Murphy-O’Connor or Michael Byrne, Competition and Regulation partner, Kate McKenna, or your usual Matheson contact. 

 

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