Class Action

Why is a class action useful?

Class actions can enable cost-effective litigation. The cost of bringing a claim is lowered when spread across a large number of claimants. Class actions also allow for swifter litigation for all parties. Instead of hearing many claims with similar factual circumstances, the court only has to hear one. This also allows for greater consistency in the application and enforcement of the law.

Is a class action currently possible in Ireland?

There is no general class action mechanism in Irish law. However, there are a number of alternative procedures to address collective grievances. These are:

• Representative actions: Order 15, rule 9 of the Rules of the Superior Courts 1986 provides for a representative action where there are numerous persons with the same interest in a matter, permitting one or more than one to sue and be sued on behalf of all those interested. However, at present, damages may not be recovered in these actions. The requirement of “same interest” has been strictly interpreted by the courts and there is no provision for civil legal aid for these actions.
• Test cases: Test cases involve selecting a representative claimant whose claims are considered representative of a larger group. The outcome of the test case becomes a precedent for all other cases that raise similar legal issues. However, the ultimate outcome is not binding. While test cases enable some efficiency, they do not offer the same level of consistency or efficiency as a class action.
• Collective representation of data subjects: Article 80 of the GDPR provides for a limited class action mechanism, allowing claims to be brought on behalf of data subjects by certain not-for-profit bodies. These bodies must be active in the field of data protection rights and have statutory objectives in the public interest.

Are class actions possible in other jurisdictions?

In the United States, successful class action lawsuits have resulted in large pre-trial settlements.

Variations of the class action mechanism are possible in certain EU Member States, such as France, Germany and the Netherlands. These systems of representative action are notably more restricted than the US class action regime.

What is the Representative Actions Directive?

Irish law on class actions is changing. The European Union has adopted Directive (EU) 2020/1828 on representative actions for the protection of the collective interests of consumers (the Directive). The Directive sets out rules for representative actions brought on behalf of consumers for the protection of their collective interests. In addition to protections under general consumer law, the scope of the Directive covers data protection, financial services, energy and telecommunications.

The Representative Actions for the Protection of the Collective Interests of Consumers Act 2023 (the Act) was signed into law in July 2023. It transposes the Directive into Irish law. However, the Act has not yet been commenced by the Minister for Enterprise, Trade and Employment.

What entities can bring class actions under the Directive?

The Directive and Act allows cross-border “qualified entities” to take enforcement action in the Irish courts on behalf of a group of consumers who allege that their rights have been breached either in Ireland or in another Member State.

These “qualified entities” must be legal persons or public bodies representing consumers’ interests who are designated by the Minister for Enterprise, Trade and Employment or another EU Member State as qualified to bring representative actions.

What remedies will be available under the Directive?

Qualified entities can apply for injunctive relief, being granted on a preventative or prohibitive basis. In addition, qualified entities may seek redress on behalf of consumers in the form of:

• Compensation
• Repair
• Replacement
• Price reduction
• Contract termination, or
• Reimbursement

The redress awarded could vary among consumers in the group or could be the same for all consumers involved in the action. Consumers do not have to opt-in to representative actions for injunctive relief. Consumers must however expressly opt-in to the representative action for monetary redress.

Are there any safeguards to prevent frivolous class actions?

The Directive and Act contain a number of safeguards to ensure the new system does not encourage frivolous lawsuits against traders. These include:

• Multiple claims by individual consumers: consumers are prohibited from bringing an individual action or being involved in another collective action against the same trader for the same infringement.
• Dismissal of “manifestly unfounded” cases: courts are empowered to dismiss manifestly unfounded cases at the earliest possible stage of the proceedings.
• Costs: qualified entities must bear the cost of any action brought under the Act. The costs of the action will be borne by the unsuccessful party.
• Disclosure of funding: qualified entities will be required to publicly disclose information about their sources of funding for the representative actions they bring.

At present, third party funding in Ireland is prohibited. However, businesses should be aware that this does not stop qualified entities from potentially bringing cross-border actions in Member States where third-party funding is available.

Conclusion

The signing of the Act into law presents a profound change in the rights available to consumers to bring collective and cross-border actions under a wide range of EU consumer protection legislation.

Two things however remain unclear.

• Firstly, it remains to be seen what Irish body or bodies will be designated as qualified entities, being the body entitled under the Act to bring the collective action on behalf of the consumers.
• Secondly, is it not yet clear how qualified entities will fund actions. Where costs are awarded under the ‘loser pays’ principle, the question remains how qualified entities, who are not-for-profit organisations, will be able to fund large actions.

The Act provides for third party funding, “insofar as permitted in accordance with law” and that a qualified entity “shall disclose to the Court a financial overview that specifies the sources of funds used by it to support the representative action.” However, the Act does not alter the long-standing position under Irish law prohibiting the funding of litigation by third parties who have no interest in the dispute. The question remains how will Irish qualified entities fund large scale consumer redress actions? The Minister for Justice has asked the Law Reform Commission to conduct a review of the law governing third party funding of civil litigation in Ireland, whose report is expected in the coming months.

The cross-border nature of the new regime will be of particular relevance to businesses. This is because qualified entities can potentially come together to bring cross border actions in Member States where third party funding is available.

For more information and expert advice on related matters, please contact a member of our Dispute Resolution team.

The content of this article is provided for information purposes only and does not constitute legal or other advice.

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