knowledge 25 July 2023 |

The Representative Actions Act 2023 signed into law but lacks clarity on litigation funding

The highly anticipated, first of its kind Representative Actions for The Protection of the Collective Interests of Consumers Act 2023 (“the Act”) was signed into law by the President on 11 July 2023¹. The Act marks a significant development in Irish consumer protection law and is particularly notable due to the existing limited capacity for representative actions in Ireland.

The Act allows for representative actions to be brought on behalf of groups of consumers by designated “qualified entities” (“QEs”) in respect of infringements of a wide range of EU consumer protection laws in areas such as financial services, data protection and telecommunications.

Although Ireland is one of the first EU member states to transpose the Directive in its entirety, the Act is awaiting commencement, and there are several operational aspects which will need to be provided for by Ministerial Regulation, most of which relate to the role of the QEs.

The QE must be a legal person with a non-profit character whose main purpose is one that demonstrates that it has a legitimate interest in protecting consumer interests, in addition to meeting other criteria. The identity of the QEs in Ireland is not yet known, with the Act providing that organisations may apply to the Minister to be designated as a QE (under certain conditions) and that the Minister may then designate or refuse to designate the organisation as a QE. The Bill Digest published on the 13 April 2023 noted that the Central Bank of Ireland, the Competition and Consumer Protection Commission and the Financial Services and Pensions Ombudsman may be prospective QEs.²

One key consideration yet to be addressed is how the new species of consumer representative actions will be funded, given the continuing prohibition on maintenance and champerty in Ireland.³ This is an issue as the Directive stipulates that Member States must take measures aimed to ensure that the costs of representative actions do not prevent qualified entities from effectively exercising their rights to seek relevant relief.

The issue of litigation funding was explored in detail during the pre-legislative scrutiny of the General Scheme of the Bill. The Government acknowledged that the limitation on access to funding for civil litigation in Ireland is likely to discourage some not-for-profit organisations from stepping forward to seek designation as a QE. The Government noted that the Law Reform Commission is currently reviewing the area of third party funding and their report is expected in 2024, but that the transposition of the directive could not await this. The Law Reform Commission has since published a Consultation Paper on 17 July 2023. The Government also confirmed that the State would neither fund nor underwrite the costs of representative actions due to the prohibition on maintenance and champerty.

The Act provides that a QE can charge a modest fee to consumers who request to be represented in a representative action for redress. There is no equivalent provision in respect of representative actions for injunctive relief.

The Act also provides that a representative action for redress may be funded by a third party “insofar as permitted in accordance with law” and sets out a number of safeguards around such funding, but does not alter the current position that litigation funding is prohibited save in limited circumstances. Notably, in contrast to the approach recently taken to newly permitting the third party funding of international commercial arbitration, there is no express disapplication of the offences and torts of maintenance and champerty.⁴  See our briefing here for more information relating to this topic.

Also contributed to by Isobel Murphy