Third Party Funding of International Commercial Arbitration in Ireland

Third Party Funding of International Commercial Arbitration in Ireland

Third-party funding of international commercial arbitration in Ireland will be permitted upon the commencement of s.124 of the Courts and Civil Law (Miscellaneous Provisions) Act 2023 (the “Act”) [1]. The Act was signed into law by the President on 05 July 2023 but shall come into operation on such day or days as may be appointed by order/s made by the Minister for Justice.

The above development moves away from existing prohibitions on the torts of champerty[2] and maintenance[3] which have formed established law in Ireland for centuries[4].  However, the new development, if/ when enacted, will affect disputes that take the form of/ or result from legal proceedings meeting the description of an international commercial arbitration[5] only.

An arbitration is considered to be an international commercial arbitration if[6] neither one of the parties is a consumer and:-

1. The parties to an arbitration agreement have, at the time of conclusion of that agreement, their places of business in different States; or
2. one of the places is situated outside the State in which the parties have their place of business:
   • the place of arbitration if determined in, or pursuant to, the arbitration agreement;
   • any place where a substantial part of the obligations of the commercial relationship is to be performed or the place with which the subject-matter of the dispute is most closely connected; or
3. the parties have expressly agreed that the subject matter of the arbitration agreement relates to more than one country.

The Act proposes[7] that a new section 5A be added to the Arbitration Act 2010, providing that:-

• The offences and torts of champerty and maintenance do not apply to legal proceedings that take the form of/ or result from legal proceedings that meet the description of an international commercial arbitration (as defined above);
• A third-party funding contract, where the third-party funder funds the costs of a party to those proceedings in return for a share in any proceeds that party receives, relating to such international commercial arbitration, shall not be treated contrary to public policy or otherwise illegal or void, on condition it meets any criteria prescribed by the Minister for Justice as to the content of such agreement contract.
• Act further allows for the minister to prescribe criteria, including criteria relating to transparency in relation to funders and recipients, for third-party funding contracts.

Third-party funding of litigation in Ireland involving disputes that do not fall into the above category will remain prohibited in Ireland following commencement of s. 124 of the Act. A Law Reform Commission Report is awaited in relation to that prohibition before there is likely to be any broader legislative change.

On 17 July 2023, the Law Reform Commission issued a consultation paper[8] on Third-Party Litigation Funding, having as its goal to inform debate, stimulate discussion and to invite responses and submissions from all interests and perspectives that will enable the Commission to move to a final report setting out its recommendations.  A brief yet informative discussion on the topic may be found on the Law Society of Ireland Gazette Magazine website [9] at this link.

Authors: Deirdre Farrell, partner deirdre@amoryssolicitors.com and Mike Collum, solicitor, Amorys Solicitors mike@amoryssolicitors.com.

[1] s.1 (4) of the Act

[2] In the context of the within article means the funding of litigation by an unconnected third party in expectation of benefitting in some way e.g. by way of sharing in profits from that litigation

[3] For the purpose of this article means funding of litigation by unconnected third party/ies with no expectation of sharing in profits/ intermeddling in litigation

[4] See Maintenance and Embracery Act 1634 at this link.

[5]  See s. 124 of the Act, specifically s. 5A (5)

[6] Article 1(3) of the Uncitral Model Law on International Commercial Arbitration 1985, as amended in 2006, incorporated into the law of Ireland pursuant to s. 6 of the Arbitration Act 2010.

[7] At s. 124 of the Act

[8] Law Reform Commission Consultation paper on Third Party Funding may be found on its website at this link

[9] “LRC looks at pros and cons of third-party funding”, Law Society of Ireland Gazette, 17 July 2023 at this link