Irish Product Liability and Safety Update – August 2022

Risk of class actions in Ireland remains low

The Irish government has published draft legislation to enable groups of consumers to sue for breaches of any of 66 different EU consumer protection laws, including GDPR and product safety. The proposed legislation, which will implement an EU Directive, stops well short of introducing US-style class actions in Ireland. 

European Class Actions?

Class actions started in the United States. In the opt-out variant, a court may permit a claimant to sue a company on behalf of all persons who have suffered similar injuries or losses. Any judgment is binding on those persons, except those that opted-out after receiving notice of the action. In contrast, in opt-in class actions, there is no automatic enrolment of claimants – claimants have to sign up to be part of the action. 

Critics argue that class actions encourage large numbers of weak or frivolous claims and can unfairly pressurise defendant companies to settle. That view appears to have influenced the cautious approach taken in the Directive and in the proposed Irish legislation.

Some European countries have a more liberal view. Dutch courts since 2020 may permit class actions in all areas of law affecting businesses, though with substantial safeguards intended to avoid abuses.

Only not-for-profits

The proposed Irish legislation requires the “qualified entity” to be an independent, not-for-profit body involved in the protection of consumer interests. This requirement may discourage actions, as Ireland has few not-for-profit consumer organisations who might take on large-scale litigation for consumers and face costs risks. Public bodies such as the Competition and Consumer Protection Commission (CCPC) may not wish to do so either, given their tight budgets.

No opt-out

The proposed legislation does not include an “opt-out” option for Irish residents, even though the Directive permits “opt-out” actions. Ironically, non-Irish qualified entities acting on behalf of consumers elsewhere in the EU may sue defendants based in Ireland using the opt-out procedure, if permitted in their own country. However, the proposed scheme will enable qualified entities to seek court orders against offending traders to halt prohibited practices, without getting individual consumers’ consent to the court application. In contrast, individual consumers will only be represented by the qualified entity in an action for damages and other redress measures if they apply to be represented.

Who pays the bills?

The Directive requires states to make these actions affordable. The draft law does not propose government funding but the courts won’t charge court administrative fees, and a qualified entity may charge individual consumers a small fee to join an action (estimated to be about €100).

These measures may not be enough to encourage qualified entities to bring actions. Court fees are usually a tiny percentage of legal costs. Also, the qualified entity, and not the individual consumer, would have to pay any shortfall in legal costs, which could be substantial if a case failed.

Comment

The proposed legislation, if enacted, may not achieve its objectives. 

Instead, individual consumers may choose to avail of the Irish small claims courts. In those courts, claims cannot exceed €2,000, the use of lawyers is not encouraged and there is no costs risk if the consumer loses.

For groups of clients with higher value claims of a similar nature, Irish claimant lawyers typically seek a judgment or settlement in a “lead case” in the High Court and then try to persuade the defendant to settle the other cases. Third party speculative litigation funding is illegal in Ireland, so lawyers usually have to fund their clients’ claims in the hope of recovering substantial fees if they win.

McCann FitzGerald LLP ©