Under Irish law, save for limited exceptions, third-party litigation funding is unlawful as it is contrary to the rules of maintenance and champerty.

There have been calls from the judiciary for legislative change to overhaul the rules, partly because they potentially impede constitutionally protected rights on access to justice.

Appetite for change

In Persona Digital Telephony Ltd v Minister for Public Enterprise [2017] IESC 27, the first Irish case on professional third-party litigation funding, the then Chief Justice, Susan Denham, acknowledged that with Ireland being an international trading State, and with issues arising on international arbitrations, it might be appropriate to have a modern law on champerty and the third-party funding of litigation.  The courts have consistently reiterated since that any changes are more properly matters for the Irish legislators rather than the courts (see SPV Osus Ltd v HSBC Institutional Trust Services (Ire) Ltd [2018] IESC 44).

The Report of the Review of the Administration of Civil Justice (Kelly Report) published in 2020, recommended a policy review of third-party funding of litigation costs.  The Minister for Justice (Minister) published an

implementation plan (Plan) of those recommendations in May 2022.  The Plan commits to reviewing third-party litigation funding. However, weighing up policy considerations around such funding will not take place until after completion of the Law Reform Commission’s (LRC) examination on the subject, which is currently ongoing.  On 17 July 2023, the LRC published a consultation paper on third-party litigation funding, seeking views on legalising and regulating third-party funding.  The consultation remains open until 3 November 2023.

Third-party funding in international commercial arbitration

In the meantime, legislation permitting limited third-party funding has been signed into law.  The Courts and Civil Law (Miscellaneous Provisions) Act 2023, when commenced, will amend the Arbitration Act 2010 to allow for third-party funding in “dispute resolution proceedings”, which are defined as:

• International commercial arbitration.
• Any proceedings arising out of international commercial arbitrations before a court of competent jurisdiction for the purposes of the Model Law. In Ireland, this is the High Court (Court proceedings)
• Any appeal from a decision of such Court proceedings (Appeal);
• Any mediation or conciliation arising from an international commercial arbitration, Court proceedings or Appeal.

Third-party funding is defined as an agreement between a party to dispute resolution proceedings and a third-party funder, for the funding of all or part of the costs of the proceedings, in return for a share or interest in the proceeds of the proceedings.

The legislation also provides for the introduction of regulations prescribing transparency requirements for funders and recipients.  Where the third-party funding contract complies with any such regulations, it will not be contrary to public policy, illegal or void.  It remains to be seen whether such regulations will follow.

Wider changes

In response to a parliamentary question in September 2022, the Minister explained the rationale behind this limited legislative change, was to promote Ireland as a choice for international commercial legal business under the Ireland for Law initiative.

Litigation funding remains very much on the Irish legislator’s agenda, with the recently enacted Representative Actions for the Protection of the Collective Interests of Consumers Act 2023, and the LRC consultation paper on litigation funding.

Whilst the Act has been signed into law, a commencement order is awaited.  We will continue to monitor the development of the Act, and any regulations made under it.  If you would like to discuss this development in more detail, please contact Gerard James or your usual William Fry contact.

Contributed by Gail Nohilly