The Supreme Court has upheld an earlier High Court ruling that third party litigation funding is unlawful. However, the Supreme Court recognised that the law, as it currently stands, represents a potentially unfair barrier to those who cannot afford to litigate.
Esat Digifone case
The case concerned a challenge by unsuccessful bidders for a mobile phone licence awarded by the State in 1996 to Esat Digifone. The Plaintiffs’ challenge was being funded by a company who was not a party to the proceedings which both the High court and the Supreme Court found to be unlawful.
What is meant by Maintenance and Champerty?
If a person or corporation funds litigation but has no interest in it, this is known as third party litigation funding. This is illegal according to the ancient offences of maintenance and champerty. Maintenance is the giving of financial assistance to a party in the litigation by a third party who has no interest in the litigation. Champerty occurs if the third party giving the assistance will receive a share of any award of damages from the litigation. The legislation governing maintenance and champerty dates as far back as the fourteenth century.
What did the Supreme Court say?
The Court was concerned about the very real possibility that the case may not go to trial because of the difficulties encountered by the Plaintiffs being able to run the case without third party funding.
The Court noted that litigation in common law countries (such as Ireland) is a much more expensive proposition when compared with other countries. In other legal systems, a much higher burden is placed on the taxpayer. This is because in non-common law countries, the judiciary, as opposed to the parties, are responsible for much of the fact finding and legal research and also because Irish Judges do not have access to research departments and can only access a relatively small number of legal researchers. Judge McKechnie did not agree with the decision of the other four judges and in his dissenting judgment he deferred making any Order and instead invited the State to address the “deeply disturbing” situation of the plaintiffs being unable to prosecute their case “solely because of the continuing existence of ancient principles of law”.
The Court made references to the potential for a constitutional challenge to be brought by plaintiffs. This would be based on a proposition that the plaintiffs’ inability to access third party funding amounts to a barrier to their constitutional right of access to the courts. However, as the proceedings were not framed in the context of a constitutional challenge, the Supreme Court had no jurisdiction to rule on the issue.
The effects of the decision
Third party funding remains illegal in this country, although it may yet be challenged under constitutional law. However, the Supreme Court has sent out a very clear signal to the Oireachtas that the law in this area needs to change. As noted by the Chief Justice, creating a modern law in this area is a complex and multifaceted issue, more suited to a full legislative analysis.