The General Scheme aims to transpose the European Union Representative Action Directive (EU Directive 2020 1828) (the “Directive”) into Irish Law.

The Directive is an EU-wide response to recent mass consumer rights breaches by private companies, such as the 2015 car emissions scandal and the 2017 mass flight cancellation. It will allow for several cross border qualified entities to come together to represent EU consumers where they have been harmed by the same alleged infringement which has been caused by the same trader in several Member States.

Once enacted, the General Scheme will mark one of the most significant reforms in consumer protection in the country in decades by introducing a new civil litigation mechanism that will allow for collective actions.  This is effectively an EU-style of class action, which will be available for losses suffered by consumers arising out of breaches of over 60 existing EU Regulations and Directives.

The government has sought to distinguish the regime from class action litigation in the US, noting that only certain, non-specified, non-profit entities will be able to take a case. There will also be a number of safeguards within the proposed legislation to protect against frivolous and opportunistic claims, including cost orders, a requirement for transparency on funding, scrutiny of potential conflicts of interest, the dismissal of manifestly unfounded cases and settlements requiring court approval.

There are currently no comprehensive provisions in the Court rules for tackling class actions in a consistent manner. While there are some types of multi-party litigation in Ireland these types of actions are very limited in scope and have a number of draw backs. The new type of representative action introduced by the General Scheme will have much broader application.

Qualified Entity

Under the General Scheme a “Qualified Entity” may act as a claimant party on behalf of consumers who have opted into a representative action against a trader.

An organisation may apply to the Minister for Enterprise, Trade and Employment Remedies to be designated as a Qualified Entity for both domestic and cross-border actions, if it meets certain criteria.

An organisation must:

• be a legal person constituted under Irish law that can demonstrate 12 months of public activity in the protection of consumer interests;
• demonstrate a legitimate interest in protecting consumer interests;
• have a non-profit-making character;
• be solvent;
• be independent; and
• publish certain information in plain and intelligible language, in particular on its website.

The designation will be of indefinite duration, but subject to a five-year periodic review.  The specifics in relation to the designation process will be dealt with under Ministerial regulations.  

Procedure and Opt-In

The High Court is the designated court for representative actions. The General Scheme provides that the Superior Court Rules Committee will make rules of court in relation to the conduct of representative actions.

Qualified Entities will be able to apply for injunctive relief and other redress including compensation, repair, replacement, price reduction, contract termination or reimbursement on behalf of consumers.

The plaintiff in a representative action will be the Qualified Entity, not the consumer(s).  That Qualified Entity will have all the rights and obligations associated with this position, including such rights and obligations relating to discovery, inspection, and interrogatories. Where several Qualified Entities bring a single representative action, one must be nominated to lead the conduct of the action.  The outcome of the action will bind all Qualified Entities.

The General Scheme requires that consumers affected by an alleged infringement of their consumer rights by a trader must opt-in to a representative action for redress against that trader. Consumers must notify the Qualified Entity of their wish to be represented before the defendant trader enters an appearance in the proceedings. However, in representative actions for injunctive relief, there is no requirement for consumers to opt-in to the action under the General Scheme.

Safeguards

Along with the qualified entity requirement, a number of other safeguards are built into the General Scheme. The High Court will enjoy the discretion to dismiss any claim, at the earliest stage possible where it is deemed to be ‘manifestly unfounded’. There is scope to settle claims, with the approval of the court. The scope for action under the Directive is limited to EU Consumer Protection legislation, as included in the schedule of the Directive. The onus is also on Member States to ensure rules are in place preventing consumers from bringing an individual action and then benefitting from the collective action.

Costs and Funding

Qualified Entities, and not consumers, bear the costs of a representative action (save for the payment of any entry fee charged to consumers to join the representative action). Individual consumers may be ordered to pay part of the costs of proceedings where their conduct results in a party incurring costs.

The unsuccessful party in a representative action will be required to pay the cost of the proceeding in accordance with the usual costs ‘follow the event’ (i.e. loser pays) principle.

The Directive provides for third-party funding of representative actions, in certain cases where allowed under national law.  Under Irish law third-party litigation funding is unlawful, except where it comes within limited exceptions to the rules against maintenance and champerty. The General Scheme does not make reference to alter the existing prohibition on third-party funding of litigation under Irish law.    It rather provides that where the Court is assessing the admissibility of a representative action, it shall have regard to several matters, including the funding sources of a representative action. Where an action is funded by a third-party "insofar as permitted under Irish law", the Court must ensure that any conflicts of interest are prevented, and the funding does not divert the action away from the protection of the collective interests of consumers.

Conclusion

The Directive is required to be transposed into Irish law by 25 December 2022 and will apply from 25 June 2023.   Businesses are advised to prepare for the introduction of this new law by considering the impact of the General Scheme and the changes that may be needed in their sales practices.