Legal Updates

On 17 July 2023, the Law Reform Commission (‘LRC’) published a Consultation Paper on third-party litigation funding in Ireland (‘Consultation Paper’). The LRC has indicated that it intends to proceed to publication of a final report setting out its recommendations on the subject.

This follows recent developments on third-party funding, including changes brought about by the Courts and Civil Law (Miscellaneous Provisions) Act 2023 and debate surrounding the funding of actions permitted by the recently enacted Representative Actions for the Protection of the Collective Interests of Consumers Act 2023 (discussed in previous articles here, here and here).

Background

Third-party funding refers to investment by a third party in dispute resolution proceedings in respect of which it has no direct interest. Funding of this nature is prohibited in Ireland, save for limited circumstances, on account of the rules against maintenance and champerty. Maintenance involves the provision of financial assistance in which the funder has no interest, while champerty is a form of maintenance where funding is provided in exchange for a share of the proceeds of the litigation.

While these rules have been abolished in many other common law jurisdictions, they remain criminal offences and civil wrongs in Ireland, with the Supreme Court in Persona Digital Telephony Ltd v Minister for Public Enterprise [2017] IESC27 confirming that professional ‘for profit’ third party litigation funding is not permitted.

However, the LRC has noted that since the publication in 2016 of its issues paper on the subject “the policy background to third-party funding in Ireland, static for decades, has shifted considerably”.

Courts and Civil Law (Miscellaneous Provisions) Act 2023

The Courts and Civil Law (Miscellaneous Provisions) Act 2023 (‘Miscellaneous Provisions Act’) was signed into law by the President on 5 July 2023. It inserts a new section into the Arbitration Act 2010, which provides that the torts and offences of maintenance and champerty do not apply to international commercial arbitration and related proceedings, including court proceedings arising out of an international commercial arbitration and mediation and conciliation proceedings arising out of those court proceedings or an international commercial arbitration.

Representative Actions for the Protection of the Collective Interests of Consumers Act 2023

The Representative Actions for the Protection of the Collective Interests of Consumers Act 2023 (‘Representative Actions Act’) transposed into Irish law the European Union Directive (EU) 2020/1828 (‘Directive’). The Directive, which provides for a new legal framework to allow a ‘qualified entity’ to bring representative actions on behalf of consumers, referred to the regulation of third-party funding of such actions if allowed by national law but did not make it a requirement. The Representative Actions Act, as ultimately enacted, did not make allowances for such funding.

However, third-party funding was a key issue in the pre-legislative scrutiny process and Oireachtas debate on the legislation. The Joint Committee on Enterprise, Trade and Employment published a report recommending that proper provision be made for third-party funding to ensure that the cost of bringing such proceedings does not prevent a ‘qualified entity’ from effectively exercising their right to seek relief.

The Minister of State at the Department of Enterprise, Trade and Employment, in the context of debates on the enactment of Representative Actions Act, made reference to the upcoming LRC report on third party funding, noting that he would be following up on the matter, including implementing any recommendations in the report in order to enable the legislation “to work to it’s optimum”.

Recent Recommendations

A report of the Review of the Administration of Civil Justice, published in October 2020, recommended permitting third-party funding in bankruptcy proceedings and in proceedings concerning liquidation, receivership and administration under the Insurance (No. 2) Act 1983. A majority of the Company Law Review Group recommended in December 2021 that third-party funding be permitted for insolvency proceedings, subject to further examination by the LRC, while the Implementation Plan on Civil Justice Efficiencies and Reform Measures, published in May 2022 by the Department of Justice, committed to carrying out a policy review on third-party funding by the first half of 2024.

Conclusion

Ireland’s third-party funding rules differ from the UK and other common law jurisdictions where funding of this nature is permitted. However, there appears to be growing momentum behind a change of approach, with concerns regarding access to justice at the forefront.

The removal, by the Miscellaneous Provisions Act, of the prohibition on third-party funding in the context of commercial arbitrations and continuing questions over how the actions permitted by the Representative Action Act will be funded has brought this issue into focus.

The comprehensive LRC Consultation Paper, which includes an examination of the current Irish legal position, policy considerations for legalising third-party funding and models of legislation and regulation, also contain a series of questions intended to assist the LRC in preparing its report, with a deadline for submissions of 3 November 2023. The LRC report will be keenly awaited to see if the calls for reform are likely to lead to a change of policy in this area.