Ireland is Considering Third Party Funding for International Disputes

In recent times, third-party litigation funding has been gaining popularity in many common-law countries. The UK and Hong Kong are among those that have recognized the importance of third-party financing and permitted lawsuit funding companies to provide financial support to parties in both local disputes as well as international arbitrations. The recent developments reported in Ireland indicate a possibility that it may also follow suit and provide legal sanction to third-party funders in international arbitrations.

Legalizing third-party funding in Ireland

The government of Ireland has introduced a bill in the parliament to give legal cover to third-party funding in international arbitrations. The proponents of the bill argue that allowing funding for international arbitration will positively contribute to the country’s economy, and it will help Ireland remain competitive and emerge as a hub for international arbitration. 

Although Ireland is making positive developments, it has yet to catch up if we compare Ireland to other common-law countries. For instance, in the United Kingdom, the courts of law have made an essential contribution in this regard, as case laws have recognized lawsuit funding for arbitration and litigation specifically. 

A restrictive approach toward third-party funding

The analysis of the precedents of courts of law in Ireland indicates, however, that they have adopted a restrictive approach towards third-party funding. For example, in a case back in 2019, unfortunately, the Supreme Court held that the doctrines of champerty and maintenance prohibit any third-party funding in Ireland. However, later on, the court decided that if the legislative assembly enacted any law and changed the provisions related to champerty and maintenance, they would follow the enactment.

This decision indicates that the court of law is ready to accept any change in the law concerning third-party funding in Ireland, as long as it is via parliament and not through a court precedent.

How will Ireland move forward with third-party financing?

If the legislative assembly of Ireland legalizes third-party funding, the court could remain relevant. While considering the question of third-party funding, though, the courts of Ireland can look up to the court cases of other common law countries. Some countries have made changes recently, concluding that lawsuit funding applies not only to international arbitration but also to domestic arbitration.

The UK is one example of this change, which has adopted a positive attitude towards third-party funding. 

Regulations on Third-Party Funding

If Ireland’s legislative assembly passes the bill and gives legal recognition to third-party funding, the question of regulation of the funding companies will arise. While formulating regulations, Ireland can look up to different approaches adopted by different countries, such as the UK.

Overall, rules made by some other countries indicate that the presence of specific legislative instruments that won’t hurt the investors can give the ability to control the growth of the funding industry while protecting those behind the scenes. While in the US and the UK, there is no specific legislation to regulate third-party funding, with time, things will unfold, and we can witness the approach of Ireland concerning third-party funding, including more growth nationally and internationally.