EU Directive on Representative Actions Published
The Collective Redress Directive (EU) 2020/1828 on representative actions for the protection of the collective interests of consumers has been published in the Official Journal of the European Union.

Background

The Directive on representative actions for the protection of the collective interests of consumers (2020/1828) (Directive) was published in the Official Journal of the European Union (OJ) on 4 December 2020. It enters into force on 24 December 2020.  EU member states have until 25 December 2022 to transpose the Directive with a further six months to apply it, meaning that widespread collective redress procedures should be available after 25 June 2023. The Directive was presented in April 2018 by the European Commission and is part of the EU’s New Deal for Consumers.

The Directive effectively introduces a right of collective redress across the EU, which we previously reported on here. Once Ireland transposes the Directive, it will enable “Qualified Entities” to bring representative actions to seek injunctions, damages and other redress on behalf of a group of consumers who have suffered harm by a trader who has allegedly infringed EU law.

What to Expect

  • Scope: The list of EU laws under which a representative action can be brought is wide-ranging. In particular, the Directive applies to representative actions brought against infringements by traders of the provisions of Union law referred to in Annex I, data protection, liability for defective products, the sale of consumer goods, digital content and digital services, the rights of passengers, the supply of electricity and gas to consumers and the provision of food information.
  • Qualified Entities: A representative action may only be brought by a “Qualified Entity”, which must be designated as such by the Member State. The designation criteria for Qualified Entities has distinguish between cross-border and domestic cases.  In the context of cross-border cases, the Qualified Entity must be a not-for-profit body and so will typically be public bodies or charities. The entity must prove it has protected consumers' rights for a period of 12 months prior to being appointed as a Qualified Entity. In addition, this entity must be independent from third parties with competing economic interests to the consumers it represents. In the context of domestic cases, member states will ascertain the criteria that will apply.
  • Available Redress: Qualified Entities will be able to apply for two types of measures through their representative action: 
    • injunctive relief, which includes a provisional or definitive measure to cease or prohibit an infringing practice, as well as an order for the trader to publish the decision finding an infringement; and
    • other redress measures, including compensation, repair, replacement, price reduction, contract termination or reimbursement, but not punitive damages (to prevent the misuse of representative actions).
  • Safeguards: The EU has introduced a number of safeguards to prevent the system from being abused. For example, national courts will be permitted to dismiss manifestly unfounded cases in accordance with their national laws, and a ‘loser-pays’ principle will govern the issue of costs.
  • Funding: The Directive restricts the use of third party funding (where such funding is allowed in accordance with national law) . The Qualified Entities will be required to disclose the source of funds used to support each representative action, and they must ensure that any decisions are not unduly influenced by a funder or that the action is not funded by a competitor of the defendant.  It remains to be seen how Ireland will approach funding when transposing the Directive, as third party litigation funding is not, in general, permitted under Irish law.  
  • Settlement: The Directive sets out a procedure for the approval by the court or relevant authority for the settlement of collective claims, permitting Qualified Entities and defendant traders to settle disputes pursuant to a settlement agreement which will, in principle, be binding upon the trader, the qualified entity and on all consumers concerned.

Key takeaways

The Directive preserves a high degree of autonomy for Member States in relation to procedural elements. It will be for each Member State to determine its own rules on matters such as the admissibility of evidence, means of appeal and the minimum number of consumers required to bring a claim. As the Directive has come into force just as the UK is set to exit from the EU, the Directive will not form part of UK law which means Ireland may serve as an attractive venue for taking such collective claims. It won't be until Ireland transposes the Directive that collective redress will become available, but it is a positive step in strengthening consumer rights and facilitating access to justice for consumers.

 

Contributed by Laura Flanagan

 

Key Contacts

Paul Convery Partner

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