I wrote recently about the prospect of third-party funding being made legal in Ireland in the limited context of arbitration proceedings which would be a radical change where the Irish Courts have regularly upheld the statutory prohibition on such funding arrangements under ancient legislation (see here). It now appears that this will become a reality with new legislation that has been published.
An amendment has been introduced at committee stage to the Courts & Civil Law (Miscellaneous Provisions) Bill 2022 ("the Bill") which would in turn result in an amendment to the Arbitration Act 2010 ("the Act ") to permit third party funding of international commercial arbitration with a seat in Ireland.
The proposed amendment to the Act would exclude the offences of maintenance and champerty to all dispute resolution proceedings as defined by new Section 5(A) 5 with the definition "dispute resolution proceedings" meaning:
a) An international commercial arbitration
b) Any proceedings arising out of an international commercial arbitration before a Court of competent jurisdiction….performing any of the functions provided in the (UNCITRAL) model law
c) Any appeal from a decision of a Court referred to in paragraph (b)
d) Any mediation or conciliation proceedings arising out of an international commercial arbitration, proceedings or an appeal referred to in paragraphs (a), (b) or (c)
The amendment specifically provides that the Minister for Justice may make regulations to prescribe third party funding.
The amendment would not only allow third party litigation funding in international commercial arbitration but would also allow such funding to ancillary applications arising from international commercial arbitration including, for example, applications to stay proceedings where a binding arbitration clause exists, applications to enforce awards under international commercial arbitration or to set aside such awards. The amendment specifically refers to mediation and conciliation proceedings arising out of an international commercial arbitration and thereby extending the potential for third party litigation funding to additional alternative dispute resolution procedures that may arise as a consequence of international commercial arbitration.
The Irish government has recognised that third party funding of international commercial arbitration will assist in making Ireland a more attractive venue for international arbitration generally.
The prohibition against third party litigation funding in Ireland has come under increasing scrutiny in recent years. The proposed limited relaxation of the prohibition against third party funding brings Ireland a step closer to the position in other common law jurisdictions. It remains to be seen whether the Irish government will take further steps to extend third party litigation funding to other areas following a report on litigation funding which is due from the Law Reform Commission in 2023.
As the amendment to the Bill has the support of the current government, it is likely to be passed in the Dáil and the Seanad but this limited amendment to the prohibition against third party litigation funding is unlikely to come into effect until the Autumn of 2023.