Speed read
Since our last update, following Minister for Justice Helen McEntee's announcement that Ireland would likely introduce legislation removing the current restriction on third party funding of international arbitration, the select Committee on Justice (the Committee) met on 22 November for Committee Stage consideration of a series of amendments to the Courts and Civil Law (Miscellaneous Provisions) Bill 2022 (the Bill). One amendment proposes to insert new wording into the Arbitration Act 2010 (the Act) which will effectively remove the restriction on third party funding of international arbitration (the Amendment). The amendment also extends to proceedings arising out of international commercial arbitrations, including mediation and conciliation. It also will apply to court applications ancillary to arbitration such as interim relief applications, applications for stays in favour of arbitration and applications to enforce or set aside awards.
The Committee did not object to the proposed amendment and stated they were satisfied that it was appropriate to insert the amendment into the Bill.
The Amendment
The amendment will insert a new section 5(A) into the Act to permit third party funding in limited circumstances, specifically in relation to international commercial arbitration. It further provides that the offences of maintenance and champerty will not apply to "dispute resolution proceedings", as defined under subsection 5 of the new section. The full text of the amendment is below:
“5A.
- This section applies to dispute resolution proceedings.
- The offences and torts of maintenance and champerty do not apply to dispute resolution proceedings.
- A third-party funding contract that meets the criteria (if any) prescribed under subsection (4) shall not, insofar as it relates to dispute resolution proceedings, be treated as contrary to public policy or otherwise illegal or void.
- The Minister may, for the purposes of subsection (3), by regulation prescribe criteria, including criteria relating to transparency in relation to funders and recipients, for third-party funding contracts.
- In this section—
'dispute resolution proceedings' means:
a) an international commercial arbitration;
b) any proceedings arising out of an international commercial arbitration before a court of competent jurisdiction performing any of the functions provided for in the Model Law;
c) any appeal from a decision of a court referred to in paragraph (b);
d) any mediation or conciliation proceedings arising out of an international commercial arbitration, proceedings or an appeal referred to in paragraph (a), (b) or (c);
'third-party funding contract' means a contract or agreement between a party or potential party to dispute resolution proceedings and a third-party funder, for the funding of all or part of the costs of the proceedings in return for a share or other interest in the proceeds or potential proceeds of the dispute resolution proceedings to which the party or potential party may become entitled."
Whilst the amendment is restricted to dispute resolution proceedings in the context of international commercial arbitration, it is expressly recognised that it will extend to proceedings arising out of an international commercial arbitration, including court applications ancillary to arbitration and mediation and conciliation. Furthermore, the new section 5(A) provides for the power to make regulations prescribing criteria for third party funding contracts.
Whilst the amendment is restricted to dispute resolution proceedings in the context of international commercial arbitration, it is expressly recognised that it will extend to proceedings arising out of an international commercial arbitration, including court applications ancillary to arbitration and mediation and conciliation. Furthermore, the new section 5(A) provides for the power to make regulations prescribing criteria for third party funding contracts.
Effects of the Amendment
Given that the amendment extends to ancillary court related applications and mediation/conciliation processes resulting from an international commercial arbitration, corporate entities may be potentially incentivised to prefer arbitration with Ireland as the seat, in their contracts, as opposed to litigation.
As illustrated by Minister of State for Law Reform, James Browne at the Committee hearing, it is hoped that the amendment will "have a positive effect on the international perception of the Irish legal framework".
Next steps
Minister Browne recognised that third party funding has become an increasingly topical subject, indicating that further reform may be on the way within this realm in Ireland. In referring to the present amendment as a "limited liberalisation of third party funding", Minister Browne noted that his department would be commencing a broader policy review on the Law Reform Commission position paper on the matter which is due to be published in the coming months.
The Bill will now go to the Report and Final Stage in the Dáil before progressing to Seanad Éireann for further consideration. Thus, it is likely that it will not be until 2023 that the proposed amendments are enacted.
With thanks to Eve O'Sullivan for her assistance in preparing this article.
For more information, please contact Joe Kelly, Partner, Ciarán Ó Conluain, Partner, Sarah Murphy, Partner, Paula Gibbs, Senior Associate, Kevin Purcell, Associate, Orla Clayton, Knowledge Lawyer, or your usual A&L Goodbody Disputes and Investigations team contact.
