May 31, 2023: Third-party litigation funding remains illegal, making Ireland an anomaly among common law jurisdictions. in spite of the fact that there is a proposition to permit it for discretion. In its landmark decision Persona Digital Telephony Limited and Another v. The Minister for Public Enterprise, Ireland and Others  IESC27], the Supreme Court called for legislative reform in relation to litigation funding. However, it has been a while since that landmark decision was issued. Some people said that the EU law on consumer collective actions that allows for litigation funding could set the stage for reform in this area. However, the government has made it abundantly clear that there are no current reform plans1. Any change will have to wait for the Law Reform Commission Review on the issue, which is expected in 20242, so it looks like a law change in this area is a ways off.
The question of whether third-party litigation funding should continue to be prohibited has two sides to it. From one perspective, there is a worry that permitting outsider financing would increment claims where there is a generally overburdened court administration with the European Commission’s 2020 Law and Order Report, referring to Ireland as having a significant lack of judges and a requirement for capital interest in the general set of laws. The Minister for Justice stated, “[w]e must increase the number of judges” in the Dáil in February 2022, indicating that the government is aware of this. Additionally, there are often no minimum capital requirements or other safeguards, and litigation funders in many jurisdictions are self-regulating. Recently, the European Parliament has called for this industry to be regulated.
These arguments are refuted by the fact that, in some instances, a prohibition on litigation funding may result in unfair outcomes, hinder access to justice, and, in some instances, it may be argued that litigation funding violates the Constitution for these reasons. Third-party litigation funding is a feature of risk management in many jurisdictions, and many large corporations use it to manage risk and balance sheet provisions. The Solicitors Regulation Authority has issued guidance to solicitors on their duty to inform clients of their best pricing options, which may include the possibility of using third-party litigation funding. In the UK, litigation funding is seen as desirable for individuals as well as corporations managing risk. There is additionally the contention that, if Ireland needs to exploit its novel situation as the main English-talking precedent-based regulation locale inside the EU, its overall set of laws should be modernized and this would incorporate permitting outsider case financing.
The Review of Administration of Civil Justice (Kelly) Report3, which recommends a policy review of litigation funding, and the Minister for Justice’s request that the Law Reform Commission carry out a review of the law in this area, which is anticipated to be completed in 2024, are two indications that reform may be on the horizon. The Courts and Civil Law (Miscellaneous Provisions) Bill 2022, which is currently in its final stages and is before the Oireachtas, will allow litigation funding for arbitration if it is approved. This was seen as a first step toward legal reform when the government made the announcement in September of last year. There had likewise been a few who felt that adjustments to EU buyer regulation might achieve a finish to this restriction, even in a restricted structure.
The Directive on Representative Actions (EU Directive 2020/1828 on representative actions for the protection of the collective interests of consumers), which explicitly provides litigation funding for collective actions, received particular attention. Before the Dáil summer recess in August, it is anticipated that this legislation will be translated into Irish law; the deadline to do so is 25 December 2022. However, the Department of Justice is in charge of the section of the legislation that deals with litigation funding. It has been confirmed that litigation funding as envisioned by this directive will not be permitted in Ireland until it is explicitly provided for in law.
The issue of third-party funding is so crucial to this directive that the majority of the legislative debate in the Dáil focused on litigation funding. It was argued that the Minister of State for Enterprise, Trade, and Employment’s decision to deny funding for consumer collective actions violated EU law and completely contravened the directive’s spirit. The Minister acknowledged that this would likely dissuade some not-for-profit organizations from applying for designation to include consumer collective actions under the directive. However, the issue of funding could not be addressed until the Law Reform Commission had completed its review of the relevant legal framework.
The Law Reform Commission Review, scheduled for 2024, is expected to produce a result that is yet to be determined, but it appears that law reform in this area is still some time away.
Source – Dentons