For about twenty years, litigation finance has been thriving in the United Kingdom and former Commonwealth countries, such as Australia. In Ireland, however, existing law prohibits third-party litigation funding. Some recent developments indicate that this prohibition may fall.
In a 2017 decision, the Irish Supreme Court considered the legality of a third-party funding agreement to support a plaintiff in a “disappointed bidder” challenge to the awarding of a public contract. The Court ruled that legislation passed in 2007 confirmed the continuation of the common-law doctrines of champerty and maintenance, which prohibit third-parties from providing financial support to litigants in return for a share of the proceeds from the case. But the Court also pointed out that only the legislature had the authority to rescind the re-affirmation of the doctrines of champerty and maintenance.
The value of litigation financing explains why such statutory reform could be important for Ireland. In the last decade or so, the cost of litigation has risen exponentially, especially becaue of the increasing discovery costs. Those cost increases are driven by the fact that, in virtually any litigation matter, parties must use costly computer software to sort through a vast amount of potentially relevant electronically stored information. These costs are discouraging many litigants from fully vindicating their rights, but third-party funding can cover much of those and other litigation costs in return for giving the third party a share of the potential recovery.
In 2018, Irish jurists seemed to send a signal to the legislature that it might be time to reconsider the old common-law rules prohibiting litigation finance. This signal came in a concurring opinion in the case of SPV Osus, which considered the torts of champerty and maintenance in the context of assignment of claims arising from the Bernard Madoff Ponzi scheme. The concurring judge acknowledged that champerty and maintenance still existed as viable tort actions, but he also suggested that preserving wide access to justice might mean a revision of the common law and the enactment of statutes that would make litigation finance permissible.
Although the Irish legislature is currently preoccupied with dealing with Brexit, there is precedent for the Irish government responding to Supreme Court calls or corrective legislation. And there is a pending event that provides an opportunity to Ireland to undertake these corrections soon. In January 2019, the Irish Government announced that it has agreed to support the joint initiative of the Bar of Ireland, the Law Society and the wider legal community in promoting Ireland as a leading global center for international legal services and that this initiative forms part of the Irish Government’s Brexit strategy. Given the widespread acceptance of litigation financing in the international community, this initiative would be the perfect occasion to consider rescinding the prohibition on litigation finance in Ireland.
Keywords: litigation finance, third-party litigation funding, Ireland, Brexit
Work Cited: Rosemary Ioannou & Gavin Smith, Litigation Funding in Ireland – Is Change Coming? (Jan. 11, 2019) available at https://www.irishlegal.com/article/blog-litigation-funding-in-ireland-is-change-coming