Transposition deadline looms: Pre-legislative scrutiny of the Collective Redress draft Irish law

Speedread

Since our last update, following the publication of the General Scheme of the Representative Actions for the Protection of the Collective Interest of Consumers Bill 2022 (the Bill), two sessions of pre-legislative scrutiny (PLS) have taken place before the Joint Committee on Enterprise Trade and Employment (the Committee).

The Committee looked at the proposals during public sessions on 29 June and 14 September. In this briefing, we highlight some of the key themes arising from those PLS sessions. 

The Bill will transpose into Irish law, the EU Collective Redress Directive (EU) 2020/1828 (the Directive). Once enacted, this will mark one of the most significant reforms in the area of consumer protection and redress since the State was founded. It will allow groups of consumers, who have suffered material loss or adverse consequence due to a breach of EU consumer protection law, to come together in a type of class action (a 'representative action') to seek redress. Actions will be brought by Qualified Entities (QE) which have not yet been nominated. The Directive is to be transposed into Irish law by the end of 2022 and operational by June 2023.

The key theme arising from both sessions of PLS is that of funding of actions by QEs. With an almost total restriction on third party litigation funding in place in this jurisdiction, this topic has dominated the PLS to date.

There were some interesting remarks from the Competition and Consumer Protection Commission (the CCPC) which signalled that, for now, it would plan to share expertise and collaborate with any QEs appointed, alongside using its own enhanced enforcement powers under the soon to be enacted Consumer Rights Bill, to ultimately secure redress for consumers.  

PLS – Committee session 29 June

The Bill was presented by the Principal Officer at the Department of Enterprise, Trade and Industry (DETI). The Committee then probed certain points of interest:

• Questions were predominantly around the issue of how QEs would be funded or how they would pay costs if they lost a case. DETI's view was that the High Court has a role to play in not allowing QEs, which do not have adequate funding to proceed with claims, stating the claim would not meet admissibility criteria.
   
• It is not anticipated that there will be a limit on the number of QEs, however the focus is on meeting the transposition deadline of end 2022 and then an application process will open in early 2023 for potential QEs to come forward. The application process is to be set down via Ministerial Regulations. 
   
• QEs may be either non-profit private bodies or public bodies.
   
• The State will not fund QEs or underwrite their costs. The rules of maintenance and champerty¹ were flagged when acknowledging that in terms of actual funding, both State and third party funding are very restricted in an Irish context.
   
• When asked how non-profit private bodies would fund litigation given the rules on champerty and maintenance, there were two possible solutions mentioned:
  • Court fees will be waived for QEs via regulations to be made by the Minister for Justice
  • There will be a nominal fee of €100 per consumer that will go towards funding litigation

PLS – Committee session 14 September

On 14 September 2022, representatives from the Law Society's Business Committee (the Law Society), the CCPC and the Consumer Association of Ireland (the CAI) presented submissions to the Committee and then dealt with questions from Committee members.

• Funding for representative actions continued to be a key discussion point with representatives from the CCPC referring to it as a 'fundamentally important issue'. 
• CAI representatives were also particularly concerned with the issue of funding. They noted that as an organisation solely funded by consumer subscriptions, they would not have the resources to bring actions provided for under the Bill. 
• The proposed €100 nominal fee per consumer was broadly accepted as insignificant in terms of covering the overall legal and administrative fees associated with taking such an action.

Maintenance and champerty came up once again. Members of the Committee pointed out that the rules are historic and outdated and may need to be reassessed in light of the current Bill. However, it was ultimately concluded that these are matters for the Department of Justice. 

Qualified entities and ministerial regulations 

• In terms of who may become a qualified entity, the CAI representatives voiced their concern on the basis that the designation process is to be set out in ministerial regulations and they highlighted the perceived information gap around this. The CAI expressed concerns surrounding the timing of these ministerial regulations and sought clarification as to whether they will be available prior to the Bill becoming effective in June 2023. 
• The CAI also highlighted that the Bill will require amendments to the Rules of the Superior Courts and sought clarity around the timing of these amendments. 
• The CAI raised concerns that QEs may be designated on an ad hoc basis and expressed a desire that designation be reserved for bodies whose function is protecting consumers. The CCPC did not appear opposed to this but acknowledged that a genuine basis would have to exist as opposed to a speculative basis for designation. The Law Society considered the point that the Bill appears to contain more stipulations for designation of a QE to bring a domestic action, than is perhaps anticipated in the Directive.
• The CAI made clear that it has never sought or supported US style class actions for Irish consumers. The CAI expressed a view that it is in the consumer's best interests that civil bodies be authorised to pursue claims as QEs in addition to public bodies. The Law Society stressed that it is imperative that the Bill strikes the correct balance between providing consumers with a mechanism for collective redress and preventing a culture of frivolous collective actions. 
• Separately, the CCPC made clear that they plan to use the enhanced enforcement powers in the Consumer Rights Bill to secure redress for consumers. They propose to share expertise and collaborate with bodies who wish to become QEs and will consider how the CCPC's role might evolve in light of that experience using new powers and once it is clear whether other bodies have secured designation as QEs.
   
• Based on the submissions provided to the Committee, it appears that the CAI are considering applying to become a QE. 

Competent court 

• The CAI raised the issue that the Bill appears to ignore the administrative burden and costs associated with commencing an action, particularly given that the High Court will have jurisdiction over such claims.
  Representatives on behalf of the CAI expressed a view that the High Court is an unsuitable venue for such actions. 
• The Committee noted that other member states have used lower administrative courts for this, which has reduced such burdens and costs. Using this as a reference point, the CCPC raised the possibility of the 'fast tracking' of representative actions in the courts once the relevant updates are made to the Superior Court Rules. 

Conclusion

The Committee indicated that it would further consider this matter and so as we advance towards the transposition deadline at the end of the year, we expect to see some more activity in this space. 
A link to the full transcripts of both sessions can be found here and here.  We will continue to monitor future developments in this area.

With thanks to Simone Crawford and Eve O'Sullivan for their assistance in preparing this article.

For more information, please contact Joe Kelly, Ciarán Ó Conluain, Katie O'Connor or Sarah Murphy, Partners in ALG's Disputes & Investigations team or Orla Clayton, Knowledge Lawyer.

Date published: 13 October 2022