Until now, almost all forms of third-party funding of disputes have been illegal in Ireland. The prohibition is founded on the ancient offences of maintenance and champerty. Newly enacted legislation will soon permit funding in international commercial arbitration and it is likely that wider reform is on the way. This marks a significant advance and aligns us with many other jurisdictions on this issue.
Background
Third-party funding in dispute resolution occurs when an unrelated entity funds the costs of a legal dispute on behalf of one party. If the dispute is resolved in favour of that party, the funder is reimbursed for their initial investment and typically receives additional remuneration as a return on their investment.
Development
The Courts and Civil Law (Miscellaneous Provisions) Act 2023, signed into law on 5 July 2023, explicitly permits third-party funding of international commercial arbitration in Ireland. The legislation added a new section 5A to the Arbitration Act 2010, clarifying that the restriction on funding by parties with no direct interest in the litigation and funding in exchange for a share of the proceeds, does not apply to "dispute resolution proceedings." These proceedings include international commercial arbitration, court proceedings arising from such arbitration, and mediation and conciliation related to those proceedings. The new provisions await commencement orders. The devil is likely to be in the detail of these Regulations addressing points such as whether the existence of third-party funding arrangements require to be disclosed.
Law Reform Commission Report
The Law Reform Commission (the "Commission") recently produced a detailed report on the remaining broader prohibitions. This may potentially lead to further legislative changes. The relevant chronology is as follows:
- In 2016, the Commission sought public input on whether the torts and offences of maintenance and champerty should be abolished and if third-party funding should be permitted and regulated. However, only two submissions were received at that time.
- In 2017, the Supreme Court confirmed that third-party funding remained illegal in dispute resolution;
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In 2018 the Supreme Courts further clarified that the relevant laws also prohibit the assignment of a cause of action to a party with no direct interest in the claim;
- In October 2020, Mr Justice Kelly's Report of the Review of the Administration of Civil Justice recommended permitting third-party funding in bankruptcy proceedings and in proceedings concerning liquidation, receivership and administration under the Insurance (No. 2) Act 1983;
- In December 2021 the Company Law Review Group (CLRG) made a recommendation supportive of provision being made to allow for litigation funding in certain Insolvency proceedings;
- On 5 July 2023, the Courts and Civil Law (Miscellaneous Provisions) Act 2023 was signed into law;
- In July 2023, the Commission published a detailed Consultation Paper to update the position on the legalisation and regulation of third-party funding in Ireland.
Future developments
The Commission's consultation paper aims to gather further views on the legalisation and regulation of third-party funding in Ireland in light of these developments and seeks to inform the ongoing debate on the matter. If the outcome of the consultation eventually results in current prohibitions being abolished the upshot of this will likely lead to businesses and other dealing with claims from litigants that might not otherwise have had the resources to pursue claims. The Commission is seeking view from interested parties before 3 November 2023.
For more information, please contact Barry Cahir or your usual contact in Beauchamps.
