Insights Blog

On 17 July 2023, the Law Reform Commission published a comprehensive Consultation Paper setting out various considerations regarding the potential legalisation of third party litigation funding in Ireland and sought submissions from any interested parties. The 15 December 2023 deadline for submissions has now passed and the Commission will move to prepare a final report setting out its recommendations.

Third party litigation funding is where a third party (with no existing connection to the litigation) agrees to finance a party’s costs of litigation in return for an entitlement to a portion of any proceeds recovered by the funded party.

The torts and offences of maintenance and champerty remain part of Irish law and largely prohibit litigation funding, making Ireland an outlier in the common law world. In this regard, third party funding arrangements are permitted in the UK, the US, Canada, Australia and New Zealand, among other common law jurisdictions.

As reflected in the Consultation Paper, the weight of recent Irish judicial, political and academic commentary demonstrates that the policy background has shifted considerably in favour of allowing some form of third-party funding. In September 2022, the European Parliament passed a resolution requesting the European Commission to draft a directive regulating third party funding in all member states.[1] If such a directive is ultimately adopted by the European Commission then Ireland would be required to give effect to it. As addressed in our recent briefing, domestic legislative reform was achieved in Ireland on 5 July 2023 when the ‘Courts and Civil Law (Miscellaneous Provisions) Act 2023’ was signed into law, which once commenced will amend the Arbitration Act 2010 to permit third-party funding of international commercial arbitration.[2]

In a previous briefing we summarised the ‘Representative Actions for the Protection of the Collective Interests of Consumers Act 2023’ (the “2023 Act”).[3] The 2023 Act (once it is brought into effect) will regulate for representative actions to be funded by a third party “insofar as permitted in accordance with law”.[4] However, given the likely costs of pursuing a representative action, there is some doubt as to whether the broader effectiveness of the 2023 Act will be undermined absent further legislative reform in relation to third-party funding.

In preparing its final report the Commission will need to grapple with the key competing policy considerations supporting and opposing the legalisation of third-party funding. The final report is likely to take a view on the various models of legislation and regulation of the legal profession set out in the Consultation Paper by reference to the approaches taken in other common law jurisdictions.

We will continue to monitor developments and will provide a further update once the Commission’s final report is published. In the meantime, if you would like to discuss any of the matters covered in this update in more detail, please get in touch with any member of our Litigation, Dispute Resolution and Investigations Group.

[1]  European Parliament Resolution of 13 September 2022 with recommendations to the Commission on responsible private funding of litigation (2020/2130 (INL)).

[2]  Section 124 of the Courts and Civil Law (Miscellaneous Provisions) Act 2023.

[3]  The 2023 Act transposes Directive (EU) 2020/1828.

[4]  Section 27 of the 2023 Act.