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Litigation & Dispute Resolution

First Steps Towards Introduction of Collective Redress Procedure in Ireland

By Peter Lennon, Brian Hunt and Natalie Dillon
26 March 2021

Pre-Transposition Consultation Process

The Department of Enterprise, Trade and Employment has launched a public consultation on the transposition of an EU Directive on collective redress. A core aim of the snappily titled Directive on representative actions for the protection of the collective interests of consumers (Directive (EU) 2020/1828) is to ensure that all EU Member States put in place a facility which provides redress for consumers where a number of them are victims of the same infringement of their rights, in a mass harm situation.

Law Reform Commission Consideration

It can be recalled that collective redress was previously examined by the Law Reform Commission which published a Consultation Paper on Multi-Party Litigation in 2003 and a subsequent Report in 2005. The Report focused on the potential for reform of private multi-party litigation in Ireland.  In its Report, the Commission recommended the introduction of a procedure to be called a Multi-Party Action (MPA) which would operate as a flexible tool to facilitate the courts in dealing collectively with cases that are sufficiently similar. However, the proposals advanced by the Commission were never implemented.

Absence of Collective Redress Procedure

As a result, Ireland, along with a number of other Member States, does not currently have in place a collective redress mechanism. In cases concerning the same question or issue that affects plaintiffs or consumers, the current practice in Ireland is that the court will normally choose a test case and use the findings as a guide for other similar cases.

The absence of a collective redress procedure is believed to diminish consumers’ and businesses’ confidence and ability to operate in the internal market, distort competition, and hamper the effective enforcement of EU law in respect of consumer protection.

Once the Directive is transposed into Irish law, Ireland will be required to put in place at least one representative action procedure for injunction and redress actions which can be brought be qualified entities.

Key Aspects of Directive on Collective Redress

The new Directive expands the scope of a previous Directive (Directive 2009/22/EC) on collective redress to bring the following sectors into scope: financial services, telecommunications, health and environment.

Among other proposals, the Directive will allow non-profit making qualified entities such as consumer organisations or independent public bodies, to take either domestic or cross border representative actions to defend the collective interests of consumer in cases of mass harm. It will also require Member States to ensure “due expediency” of procedures and to avoid procedural costs becoming a financial obstacle to bringing representative actions.

It is intended that the collective redress mechanism be able to enable parties to seek different types of redress depending on the circumstances of the case. The Directive also requires that Member States prescribe penalties that can be imposed in the event of non-compliance with decisions issued in the context of a representative action.

Focus of Consultation Process

While the Directive contains some mandatory provisions for Member States, it also provides options to Member States in certain areas.

The Department of Enterprise, Trade and Employment’s consultation process is primarily seeking views on the discretionary aspects of the Directive, some of which include:

  • the types of organisations should be considered qualified entities – under Article 4;
  • the availability of qualified entities to seek both injunctive measures and redress measures as part of a single representative action and single final decision – under Article 7;
  • the effect of a court decision and whether it should include an obligation to publish a corrective statement – under Article 8;
  • the possibility of requiring the affected parties have engaged with the trader with a view to bringing about a cessation of the infringement – under Article 8;
  • should Ireland introduce an opt-in or opt-out mechanism in respect of a representative action – under Article 9 and Recital 43;
  • should Ireland allow courts to not approve settlements that are believed to be unfair – under Article 11;
  • should Ireland introduce rules around consumers’ acceptance or refusal to be bound by settlements – under Article 11;
  • should Ireland introduce rules that require the trader to provide information on representative actions to the consumer only if requested to so by the qualified entity – under Article 13;
  • measures that Ireland should take to ensure that the costs of proceedings do not prevent qualified entities from taking a representative actions – under Article 20;

Impact of Collective Redress Procedure

It is expected that implementation of the Directive will have a significant impact on how cases concerning mass harm are handled and ultimately resolved in Ireland. An effective collective redress procedure could benefit the judicial process as a whole as it should serve as a unified approach to cases concerning the same issue will constitute a more efficient use of court time and associated processes. We can also anticipate that the introduction of a collective redress mechanism will likely herald an increase in consumer-driven litigation both domestically as well as on a cross-border basis.

An interesting issue which is related to collective redress actions is the question of third-party litigation funding. According to a study published by European Parliamentary Research Service (March 2021)[1], third party litigation funding “is expected to play a growing role in the provision of litigation services in the coming years, as climate and environmental litigation cases could increase and as the aftermath of the ongoing Covid-19 pandemic could lead to a substantial number of claims.” This will also be an interesting issue to watch, particularly so in respect of Ireland where third-party litigation funding is currently prohibited under the torts of maintenance and champerty.

Timeframe for Transposition and Implementation

The Directive entered into force on 24 December 2020 and Member States have until 25 December 2022 to transpose it, with a further six months to apply it. This suggests that a collective redress mechanism should be available in Ireland, and across all other Member States from June 2023.

The Department of Enterprise, Trade and Employment’s consultation process concludes on 7 May 2021.

 

For more information on the content of this insight please contact:

Peter Lennon, Partner | E. peter.lennon@rdj.ie | T. +353 1 605 4222

Brian Hunt, Partner | E: brian.hunt@rdj.ie | T: +353 1 605423

 

[1] European Parliamentary Research Service, “Responsible private funding of litigation” (March 2021).

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