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Australia – Public Inquiry Into Access To Justice Arrangements – Litigation Funding And Class Action Procedures.
21 January 2014

Legal News & Analysis – Asia Pacific – Australia – Dispute Resolution

 

On 16 September 2013, the Productivity Commission released an issues paper in relation to its inquiry into Australia’s system of civil dispute resolution, focussing on constraining costs and promoting access to justice and equality before the law.

 

The inquiry will address, among other things, the extent to which litigation funding could lower the cost of civil dispute resolution, with specific reference to the following:

 

  1. the risks posed by litigation funding arrangements, compared with the risks posed by contingent and other billing practices, and the regulatory responses required to manage these risks,
  2. the benefits of litigation funding and areas of civil justice where the use of litigation funding would be appropriate,
  3. whether litigation funding is encouraging a growth in litigation in some sectors, with a consequent adverse impact on access to justice for other litigants, and
  4. whether firms are settling more cases due to the availability of litigation funding.

 

The Productivity Commission will also consider the efficacy of class action procedures, a form of litigation closely related to litigation funding.

 

Regulatory control of litigation funders

 

The question of regulatory control of litigation funders is a key issue, following the legislative amendments that took effect in July 2013, exempting litigation funders from the need to hold an Australian Financial Services Licence (AFSL) and requiring funders to maintain, for the duration of any funded litigation, adequate practices for managing any conflict of interest that may arise in relation to the funded litigation.

 

In submissions dated 18 November 2013, Australia’s largest litigation funder, IMF (Australia) Ltd (now Bentham IMF Limited) identified the need for further ‘proportionate regulation’ of litigation funders, addressing areas such as mandatory licencing under the AFSL regime, capital adequacy requirements, disclosure obligations and the funder’s duties to the Court.

 

The US Chamber Institute for Legal Reform, a not-for profit public advocacy organisation affiliated with the U.S. Chamber of Commerce, has submitted to the Productivity Commission that regulation of litigation funders should be strengthened in 3 ways:

 

  1. oversight of regulation by an independent Commonwealth authority,
  2. a regime of statutory safeguards, enforced by a designated agency, and
  3. legislative changes addressing liability for adverse cost orders, appropriate professional licencing of litigation funders and restrictions on law firms acting in litigation funded matters where the law firms have an economic interest in the litigation funder.

 

Other submissions provided to the Productivity Commission have acknowledged that there is an important policy balance to be struck in determining what, if any, greater regulatory control should be introduced for litigation funders in Australia.

 

Inquiry time line

 

The deadline for initial submissions was 4 November 2013, however the Productivity Commission has continued to accept submissions after this date.

 

A draft report is scheduled for release in April 2014, with a final report to the Government due in September 2014. The issues paper and submissions are available here.

 

 

For further information, please contact:

 

Damian Grave, Partner, Herbert Smith Freehills
damian.grave@hsf.com

 

Jason Betts, Partner, Herbert Smith Freehills
jason.betts@hsf.com

 

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