Position Paper - Regulation of third party litigation funding in Australia
1 June 2011
The Law Council of Australia’s Board Executive resolved on 18 June 2010 that the Law Council would develop a Position Paper on litigation funding and class actions. The purpose of the paper was to set out areas in which regulation may be required for consumer protection, to minimise conflicts of interest and put an end to expensive satellite litigation over the propriety of litigation funding agreements.
The following have been identified as matters which regulation of guidance by ASIC would be supported by the Law Council:
- clarification of restrictions on litigation funders performing legal work;
- guidance as to the appropriate level of control by funders over the class action proceedings;
- improved transparency in pricing practices under litigation funding agreements;
- improvement of disclosure requirements in relation to some or all terms of the funding agreements to the Court, clients and defendants/respondents;
- prudential regulation of litigation funders;
- regulation of offshore litigation funders;
- requiring that settlement of a funded matter be approved by the Court;
- limitation of the role of litigation funders in settlement discussions, including prohibition on the funder dealing directly with the opposing party(s) and imposing a fiduciary obligation on the funder; and
- specification of mandatory terms for litigation funding agreements, including cooling-off periods and provision of independent (secondary) legal advice for class members.
The Law Council considers other matters, including advertising and regulation of the conduct of legal practitioners, are most appropriately dealt with under existing and proposed national legal profession regulatory frameworks.