Regulation

Overview

Is third-party litigation funding permitted? Is it commonly used?

Third-party litigation funding is not generally permitted in Ireland. The maintenance and champerty rules exist under the Maintenance and Embracery Act (Ireland) 1634 and prohibit third-party funding by third parties who have no legitimate interest in the proceedings.

The superior courts in Ireland have considered the impact of this old statute in a number of cases between 2013 and 2018 and, to date, have affirmed the rules still exist. In the context of third-party funding, an application was made in the case of Persona Digital Telephony Ltd & anor v Minister for Public Enterprise & Others (2016) to assess the legality of a third-party funding agreement. The plaintiff, Persona Digital Telephony Limited, was unable to fund the proceedings. A professional third-party funder from the UK was prepared to enter into a litigation funding arrangement. The plaintiff sought a declaration from the High Court that the litigation funding arrangement did not constitute an abuse of process or contravene the rules on maintenance and champerty.

While the High Court had some sympathy for the plaintiff, it affirmed that both maintenance and champerty are part of Irish law and are torts and criminal offences. The High Court found that to permit a litigation funding arrangement by a third party with no legitimate interest in the proceedings would necessitate a change in legislation and this could not be done by the High Court. This decision was unexpected, given some obiter dicta from the High Court in a judgment approving after-the-event (ATE) insurance that provided that the laws have to be interpreted in the context of modern social realities.

The decision was appealed to the Supreme Court to determine the question of: ‘Whether third-party funding, provided during the course of proceedings (rather than at their outset) to support a plaintiff who is unable to progress a case of immense public importance, is unlawful by reason of maintenance and champerty.’ The Supreme Court dismissed the appeal holding that the torts and crimes of maintenance and champerty continue to exist in this jurisdiction and it is for the legislature and not the courts to develop the law in this area and, in such circumstances, ‘a person who assists another’s proceedings without a bona fide independent interest acts unlawfully.’ In July 2018, in the case of SPV OSUS Limited v HSBC Institutional Trust Services (Ireland) Limited & Ors, which concerned the legality of an assignment of a cause of action, the Supreme Court called upon the legislature to urgently reform the area, failing which the Supreme Court itself may intervene. The Supreme Court has identified that:

urgent reform is needed so that the right of access to the courts can be rendered effective in a practical sense. It falls, in the first instance, at least, to the legislative arm of the State to take such measures as are necessary to this end. Given the complex nature of the issue involved and the multitude of ways (each with their own advantages and also drawbacks) in which it could be alleviated or remedied, it is a matter which should be resolved by the Oireachtas. The legislature is undoubtedly best equipped to carry out the sort of wide-ranging analysis, and balancing of important policy considerations, which would be required in order to ensure that the necessary change to the law can effectively vindicate the right of access to the courts. I urgently call for them to do so . . . where the legislature persistently fails to take corrective measures to vindicate a constitutional right, such as the right of access, responsibility in this regard will fall to be discharged by the judiciary. For my part, there will come a time when not to respond must constitute a neglect of responsibility; when that occurs, I will not hesitate to positively and decisively intervene in this area.

While professional third-party funding arrangements are currently unlawful in this jurisdiction, the Irish courts have found that third parties who have a legitimate interest in proceedings, such as shareholders or creditors of a company involved in proceedings, can lawfully fund them, even when such funding may indirectly benefit them.

Restrictions on funding fees

Are there limits on the fees and interest funders can charge?

Third-party litigation funding is not currently permitted in this jurisdiction. As such, there are no limits.

Specific rules for litigation funding

Are there any specific legislative or regulatory provisions applicable to third-party litigation funding?

Third-party litigation funding is not currently permitted in this jurisdiction by virtue of the common law rules on maintenance and champerty.

Legal advice

Do specific professional or ethical rules apply to lawyers advising clients in relation to third-party litigation funding?

Because professional third-party litigation funding is not currently permitted in this jurisdiction, this question is not applicable.

Regulators

Do any public bodies have any particular interest in or oversight over third-party litigation funding?

No. See questions 1 to 4.