Non-Transposition of Representative Actions Directive by Ireland: European Commission to commence infringement procedure against several Member States
As outlined in our previous update, Ireland was required to transpose the EU Directive on Representative Actions for the Protection of the Collective Interests of Consumers by 25 December 2022, to come into effect from 25 June 2023.
The legislation will create a new civil litigation mechanism whereby a designated “Qualified Entity” may act as the claimant party on behalf of consumers in a domestic or cross-border representative action against a trader for the alleged breach of one of the provisions of specified EU and Irish consumer protection law, that harms or may harm the collective interests of consumers.
In March 2022 the government approved the drafting of legislation, the Representative Actions for the Protection of the Collective Interests of Consumers Bill 2022, to transpose the Directive.
In December 2022 the Joint Committee on Enterprise, Trade and Employment published its Report on the Pre-Legislative Scrutiny of the General Scheme of the Representative Actions for the Protection of the Collective Interests of Consumers Bill 2022. The Joint Committee issued nine key recommendations in respect of the proposed legislation:
- Proper provision should be made for litigation funding in the context of representative actions to ensure that the litigation costs do not prevent Qualified Entities from effectively exercising their right to seek redress and injunctive measures;
- The Minister for Enterprise, Trade and Employment should engage with industry stakeholders to limit the administrative burden on the Qualified Entity;
- The scope of Qualified Entities should be expanded to include consumer claims from sole traders, SMEs and other businesses;
- Engagement should take place with the Minister for Justice and the Department of Justice to review and reform third-party litigation funding and the laws on champerty and maintenance;
- A detailed application, criteria and designation for Qualified Entities should be prescribed in the transposing legislation;
- Opt-in is the preferred method for multi-party actions;
- A national electronic database should be established to track representative actions and provide monitoring and transparency;
- The entry fee should be low to ensure it is not an obstacle to redress with consideration to be given to whether it should vary depending on the number of consumers linked to a class action; and
- Further clarification may be required to the transposing legislation to provide greater transparency for consumers as regards the designation and monitoring of Qualified Entities and the conduct of representative actions.
Litigation funding, where a third party provides financing to allow legal proceedings to progress, is not currently allowed in Ireland, save for limited exceptions. The resolution of this position was identified by the Joint Committee as a key issue in order to give full effect to the transposition of the Directive in Ireland.
The satisfactory resolution of this issue prior to the transposition of the Directive is complex having regard to the broader examination of this issue in Ireland. The Implementation Plan on Civil Justice Efficiencies and Reform Measures published by the Department of Justice in May 2022 provides a road map for the implementation of the measures identified in the Report of the Review of the Administration of Civil Justice to reform civil procedure. This implementation plan sets a target date of Q1 2024 for a policy review of third party funding. In a briefing note provided to the Joint Committee by the Department of Justice, the ongoing work of the Law Reform Commission was noted. Ultimately, any substantive policy review on third party funding is likely to await the outcome of the ongoing review of the Law Reform Commission.
On 27 January 2023, the European Commission, whilst acknowledging the ongoing work in most Member States to transpose the Directive, announced that it will be commencing its infringement procedure and issuing a formal notice to those Member States which did not transpose the Directive by 25 December 2022. Ireland, together with Belgium, Bulgaria, Czechia, Denmark, Germany, Estonia, Greece, Spain, France, Croatia, Italy, Cyprus, Latvia, Luxembourg, Malta, Austria, Poland, Portugal, Romania, Slovenia, Slovakia, Finland and Sweden, did not transpose the Directive by 25 December 2022.
Under this infringement procedure, Ireland will now be required to give the European Commission a detailed update within a prescribed period.
Given that the pre-legislative scrutiny process is now complete, we anticipate that the Bill will be published in the near future. We will continue to monitor developments and will provide a further update once the Bill is published.
In the meantime, if you would like to discuss any of the matters covered in this update in more detail, please get in touch with any member of our Litigation, Dispute Resolution and Investigations Group.