knowledge | 2 June 2015 |
Funding of Litigation in Ireland: Are Times Changing?
The continuing prohibition on maintenance and champerty in Ireland has restricted non-party funding of litigation here. However, the Court of Appeal has recently confirmed that After the Event (ATE) Insurance may be relied on before the Irish courts to resist an application for security for costs. Further examination of the existing prohibition is also in the works.
Prohibition on Maintenance and Champerty
The law in Ireland on non-party funding of litigation differs from many other common law jurisdictions. This is because maintenance and champerty are still impermissible here. Maintenance involves improper interference in civil proceedings often by way of the provision of financial assistance. Champerty is a form of maintenance where financial support is provided by a party with no connection to the dispute in exchange for a share in the spoils of the litigation or some other profit. In Ireland, non-party funding of litigation is only permitted where it does not breach either of these prohibitions.
One form of funding which may be acceptable is where a non-party finances litigation where it has a genuine interest in its outcome. An example is where shareholders of a company finance litigation to which the company is a party as the briefing company is not in a position to do so itself. If the company is successful in the litigation, this may also indirectly benefit those shareholders. However, the courts may make costs orders against these funders if the company is unsuccessful in the litigation. If the source of the funding is unknown, the courts may make disclosure orders to identify those involved. Also, if the opposing party to the litigation has concerns about the recovery of costs here, the court may put protective measures in place pending the conclusion of the litigation.
Another form of litigation funding that has recently been held to be acceptable in Ireland is ATE insurance. The insurance is taken out after the event which has given rise to the litigation. It covers a party’s exposure to an opponent’s legal costs if the party is unsuccessful in the litigation or arbitration. The premium, which is usually a significant percentage of the claim, is often only payable if the party is successful in the action. In the recent case of Greenclean Waste Management Ltd v Maurice Leahy p/a Maurice Leahy & Co Solicitors 1 the High Court was asked to consider whether the particular ATE policy before it breached the prohibition on maintenance or champerty. The court held that it did not. The matter then came before the Court of Appeal 2 who did not revisit this debate and simply noted that ATE insurance had “crept into this jurisdiction”.
It remains to be seen whether this judgment will encourage greater recourse to ATE insurance as a means of litigation funding in Ireland. ATE insurers may well see a bigger demand for their products. In parallel, this may facilitate greater access to the courts for impecunious litigants with good prospects of success as they take up ATE insurance.
There may also be an effect in the area of security for costs. In Greenclean, the plaintiff was resisting an order for security on the basis that the ATE policy it held would satisfy any order of costs that might be made against it. The Court of Appeal was satisfied that the existence of such a policy could be taken into account if there was any realistic probability that it would cover the costs of an opponent. However, on the facts before it, it was not satisfied that there was sufficient evidence to demonstrate the existence of an effective policy. It is also clear from Greenclean that simply adapting the standard language of a policy used in England may be ineffective in the Irish litigation environment.
What next for Litigation Funding in Ireland?
Recent media reports have indicated that an application is pending before the High Court on the validity of a non-party funding agreement in the long-running litigation surrounding the grant of the second GSM mobile telephone licence to Esat Digifone Limited in the 1990s. In 2001, Persona Digital Telephony Limited and another party, who were runners-up in the competition for the licence, commenced proceedings alleging irregularities in that competition. According to reports, the court has now been told that the plaintiffs are unable to fund the litigation and a British company is prepared to do so in exchange for share of the proceeds if the action succeeds. The court will be asked to rule on the propriety of the arrangement, whether it contravenes the prohibition on maintenance and champerty and whether a copy of the agreement should be provided to the other side. Having clarity on the precise circumstances in which litigation funding arrangements including ATE insurance are both permissible and enforceable in Ireland is critically important for litigants in Ireland, so the outcome is awaited with interest.
-  IEHC 314
-  IECA 97
This document has been prepared by McCann FitzGerald LLP for general guidance only and should not be regarded as a substitute for professional advice. Such advice should always be taken before acting on any of the matters discussed.