Further work will likely be required from Government if legislation aimed at providing for consumer class actions against traders is going to have real impact, a legal conference in Dublin was told.
At the Redefining Conflict Resolution in Irish Business event on Thursday, organised by Mason, Hayes and Curran (MHC), speakers suggested the question of who would pay for class actions remained unclear.
Such potential litigation is provided for in the Representative Actions for the Protection of the Collective Interests of Consumers Act 2023, which became law at the end of April this year.
Enacted as part of Ireland’s transposition of a European Union directive, it provides for “qualified entities” to take legal action seeking redress on behalf of consumers in a particular range of areas.
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The qualified entities must be not-for-profit organisations and while only one, the Irish Council for Civil Liberties, has been registered so far, Attorney General Rossa Fanning told the conference the number is set to grow over the coming months.
Under the legislation, consumers must actively opt-in to any action to be undertaken and pay a fee to participate although this is capped at €25, something that has contributed to doubts about whether the system, as currently envisaged, can work effectively.
“You look to the consumer and the consumer has to pay a maximum fee of €25,” said senior counsel Kelley Smith. “And then you look at the fact that the qualified entity must be a not-for-profit. So, ‘who’s going to pay for this?’ is a fairly obvious question that comes up.
“The directive allows for third-party funding; it allows someone outside of the action to fund the action, provided that is permitted in national law,” she said. “But Ireland, save for in very limited circumstances, does not permit third-party funding of litigation ... although that landscape has the potential to change as it is being looked at.
“But one of the things that the judge has to look at is the funding of the application. They have to be satisfied it is assured. And so as things stand, you’ve got the consumer contributing very little to the action, and then you’ve got the non-profit nature of qualified entity. That has led some commentators on the Act to query how effective it could really be.”
Peter Johnston, a partner at MHC specialising in dispute resolution, said the “mood music” around some recent judgments also suggested movement would be required on the issue of funding. “There’s going to have to be some sort of workaround, even in a limited way.”
He said the Act had the potential to help groups of consumers and the evidence from the UK was that similar legislation there had facilitated a number of significant cases that would not otherwise have been taken.
The opt-in nature of the system – comparable ones elsewhere in the European Union have tended to be opt-out – has separately been identified by solicitor Philip Andrews of Andrews Law, who previously addressed an Oireachtas committee on the issue as a member of the Law Society Business Committee, as a particular barrier to cases being taken in the Irish courts.
“I don’t know how you do an opt-in,” he said on Thursday. “It’s a very much more difficult standard to get certified as a class. You actually have to have physical proof that each of the parties in the class has decided they want to be part of that class whereas, if it’s an opt out, you can just say it’s for everybody who was harmed. You then get the amount for everybody and you have to distribute it properly.”
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