When Enda Kenny promised on the election trail in 2011 that he would make Ireland the best small country in the world in which to do business, he was leaning into the strategy that lifted the country out of poverty over the previous three years; find a niche in the global economy and pursue it relentlessly.
Another niche now presents itself to Ireland in the form of an opportunity to be the European hub for class action lawsuits and in particular class actions – funded by third parties for commercial gain – against US multinationals.
Class actions have been effectively banned here but pressure is mounting from several sources to relax the rules.
Historically, our embrace of the common law legal system combined with a judiciary that was deeply suspicious of class actions has been a substantial bulwark. It has been matched with a public policy position that they are unnecessary because powerful state-run regulators champion the interest of the public against large corporations.
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The legal obstacles remain in place. The right to sue as group or on behalf of others are circumscribed and the Supreme Court shows little appetite for expanding them. But we have had to introduce some limited reforms to comply with the 2024 EU Representative Actions Directive (RAD) to oblige states to provide mechanisms for collective redress.
What this boils down to is allowing “qualified entities” designated by the Minister for Enterprise, Trade and Employment to bring actions for breach of consumer protection laws. To date, only one case has been brought – by the Irish Council for Civil Liberties against Microsoft in May this year – for breaching data privacy laws.
But the real pressure seems to be coming from the legal profession.
[ ICCL brings High Court action against Microsoft over alleged data breachesOpens in new window ]
The Law Reform Commission has looked at models to allow third party funding of litigation. It is already allowed in international arbitration – although, the Government has not formally commenced the legislation – and legislation is before the Oireachtas to allow it in certain insolvency proceedings.
This is very much the thin end of the wedge, but the direction of travel seems pretty clear. And why wouldn’t it be with €3 billion in fees up for grabs.
This figure comes from a report on the class actions and third-party funding in Ireland by the European Centre for International Political Economy, a Brussels-based think tank. It was commissioned by the European Justice Forum (EJF) – which describes itself as a coalition of companies promoting fair and transparent access to justice. Its members include well known consumer and medical products manufacturers including Bayer, Johnson & Johnson, Medtronic and Procter & Gamble. Big insurers including Zurich are members as are various European industry lobby groups.
Unsurprisingly they are not big fans of class action lawsuits, and the €3 billion figure is what they think it could cost them and their peers in fees under a scenario in which Ireland becomes the go-to destination for class actions in Europe.
They believe that the Irish legal system would be very attractive to class action litigants. It is the only English language common law jurisdiction that is aligned to EU legal standards with rulings that are enforceable across the EU. It is no wonder that lawyers here are rubbing their hands at the prospect of a loosening up of Irish rules on class action and third-party funding.
Be careful what you wish for is the rejoinder from the EJF. Technology companies and life science companies are among the most popular targets for this sort of litigation, and they also happen to be pillars of the Irish economy.
“If litigation costs in Ireland were to reach just 30 per cent of the levels observed in the US, the impact could exceed €3 billion, equivalent to Ireland’s total annual budget for public infrastructure investment,” they point out.
[ Consumer class actions legislation requires work to be effective, conference toldOpens in new window ]
You can quibble as to whether this really would represent a cost of doing business in Ireland for multinationals or not, but the point is well made; any move to relax the rules around this sort of litigation does need to be sense checked for unintended consequences particularly in the terms of our competitiveness as a location for international investment is very uncertain times.
Some jurisdictions that made it easier to bring class actions are now having a rethink according to EJF, who also argue that most of the money awarded in class actions gets hoovered up by lawyers and the financial institutions that fund the legislation, not that this is necessarily a problem from the perspective of Irish law firms and financial institutions.
The lobby group wants Ireland to take a lead in shaping EU policy on class actions when we assume the presidency of the EU next July. The EJF’s self-interest is naked but that does not necessarily make them wrong.
