Third Party Funding of International Commercial Arbitration in Ireland
On 5 July 2023, the Courts and Civil Law (Miscellaneous Provisions) Act 2023 (the “Act”) was signed into law by the President of Ireland. Once commenced, the Act will amend the Arbitration Act 2010 and permit third-party funding of international commercial arbitration.
Reform
Litigation funding, where a third-party provides financing to allow legal proceedings or an arbitration to progress, is not currently allowed in Ireland, save for limited exceptions.
The Act introduces a new section 5A to the Arbitration Act 2010 which disapplies the torts and offences of maintenance and champerty to “dispute resolution proceedings” which are defined as:
- an international commercial arbitration;
- 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;
- any appeal from a decision of a court referred to in paragraph (b);
- 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 Act provides that a third-party funding contract relating to “dispute resolution proceedings” shall, so long as it meets certain criteria, not be treated contrary to public policy or otherwise illegal or void.
The Act also provides that the Minister for Justice may make regulations prescribing criteria for third party funding contracts, including criteria “relating to transparency in relation to funders and recipients”.
The relevant provisions of the Act have not yet commenced and are therefore not yet operational.
Commentary
The Act brings welcome clarity to the legality of third-party funding of arbitrations which fall within the scope of section 5A of the Arbitration Act 2010 (as amended).
This development takes place against the backdrop of a broader policy review of the Irish position regarding third party funding. On 17 July 2023 the Law Reform Commission published a consultation paper seeking submissions from interested parties on third-party funding. The consultation closed on 15 December 2023 with recommendations expected in 2024.
We will continue to monitor developments and provide a further update once the relevant section of the Act has commenced.
In the meantime, if you would like to discuss any of the matters covered in this update in more detail, please get in touch with any member of our Litigation, Dispute Resolution and Investigations Group.
