Litigation Funding draft regulatory changes - Our initial impressions
In response to the LCM Funding Pty Ltd v Stanwell Corporation Limited decision in June 2022, the government has just released the draft Corporations Amendment (Litigation Funding) Regulations 2022 (draft Regulations) which propose changes to the regulation of litigation funding schemes under the Corporations Act 2001.
Released on Friday the 2nd of September by the Assistant Treasurer and Minister for Financial Services Stephen Jones and Attorney-General Mark Dreyfus, the government is seeking to provide litigation funding schemes with an explicit exemption from the managed investment scheme, Australian Financial Services Licence, product disclosure and anti‑hawking provisions of the Corporations Act 2001.
In his statement, Attorney-General Mark Dreyfus said “the draft regulations would reinstate the longstanding exemptions from the Australian Financial Services Licence (AFSL), managed investment scheme (MIS) and other corporate regulatory regimes for litigation funders that existed prior to the August 2020 changes”
Our initial thoughts -
- Some had expected the government to maintain the requirement for funders to hold an AFSL, whilst removing the managed investment scheme requirements for funded class actions. However, the current government has rejected the notion that there was any public policy need for the August 2020 changes, by completely reversing them.
- The changes will provide a good deal of confidence to litigation funders that they can again get on and fund class actions without having to weigh up the burden and cost of the licence and managed investment scheme regime.
- It will also mean that greater competition to fund class actions will return, with a number of funders no longer shut out as a result of the significant commitment and resources required with respect to the MIS regime.
- There are also likely to be a number of dormant class actions that may now be revived, with the return to a simpler process.
- Now that the previous government’s regulation of funded class actions has been removed, attention will turn to how the current government will respond to the recommendations in the now aging ALRC Report into Litigation Funding and Class Actions.
- We expect consideration will be given to adopting the recommendation that law firms be able to charge contingency fees in class actions, currently only available with respect to class actions filed in the Victorian Supreme Court.
Mackay Chapman
The contents of this article do not constitute legal advice and it is not intended to be a substitute for legal advice and should not be relied upon as such. It is designed and intended as general information in summary form, current at the time of publication, for general informational purposes only. You should seek legal advice or other professional advice in relation to any particular legal matters you or your organisation may have.
