The Future of Litigation Finance in Australia
Australia is oftentimes considered to be the birthplace of modern litigation financing. During the 1990s, Australia established itself as the worldwide innovator in the sector, passing legislation that would be crucial in the expansion of the industry. One of these initial pieces of legislation legalized the utilization of third-party financing and the legalization of class-action lawsuits. In the next decade, a court decision recognized the validity of litigation finance. However, this past year has witnessed some interesting and potentially inhibiting developments for the litigation finance sector.
Class Actions and Litigation Funding
While the presence of class action lawsuits in Australia did not come until 1992, being legitimized much later than in the United States, claimants made up for the lost time. Along with the semi-recent surge of class action lawsuits, litigation financing provides capital for many of these cases. In fact, in September 2016, it was reported that, for the last three years, approximately 49% of class actions filed in Australia’s Federal Court were funded through third-party litigation financers. This number abruptly shot up in only a matter of two years. In 2018, it was found that, for the past three years, 78% of class actions filed in Australia’s Federal Court were financed through third-parties. The increased presence of litigation financing in class actions has lead to more government involvement.
Playing Their Part, Courts
Looking into the future, the Australian government is responding to the influx of costly class-action lawsuits by developing expanded regulatory measures. Thus far, Parliament has given the “go-ahead” for an inquiry into Australia’s class actions and litigation financing. The Association of Litigation Funders of Australia has issued a statement and plans to:
- remain transparently engaged with the Parliamentary Joint Committee on Corporations and Financial Services
- contribute valuable insights into class actions
- present comprehensive perspectives on litigation finance
The Role of Politics in Third-Party Funding
The government aims to require funders to hold sufficient funds so that they can manage their financial responsibilities. While the regime’s goal is to improve transparency and protect legal consumers, the additional regulations, if not handled correctly, will adversely impact the availability of such services on the market. International funders may become dissuaded, limiting the funding that litigants with meritorious claims have access to. Access to litigation financing helps to develop a level financial playing field by providing claimants with valuable resources that prevent them from settling prematurely. It is pivotal that the Australian Parliament balanced rules and regulations.
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Topics: third-party funding, litigation finance, litigation funding, Australia, class actions
