Analysis: Third-party funding of international arbitration — draft rules published
Matheson partners Nicola Dunleavy and April McClements examine upcoming changes to third-party funding of international arbitration.
Third-party funding of international commercial arbitration in Ireland was put in question following Supreme Court judgments that third-party funding of Irish court proceedings remains unlawful. This question looks set to be answered to confirm that the prohibition on third-party funding does not apply to international commercial arbitration.
This is a significant step forward to clarify the position of third- party funding for international commercial arbitration in Ireland. The Minister of State for Law Reform, James Browne, noted that the changes “will have a positive effect on the international perception of the Irish legal framework by removing any doubts regarding the ability to enforce arbitration awards in the State”.
The legislative amendments have now been published in the draft Courts and Civil Law (Miscellaneous Provisions) Bill 2022. It is hoped that the legislation may be passed in Q1 2023.
Third party funding of “dispute resolution proceedings”
The amendments will make changes to the Arbitration Act 2010 to expressly provide that:
- The offences and torts of maintenance and champerty (which arise, respectively, where litigation is funded by a funder who has no direct interest in the litigation and where funding is in exchange for a share of the proceeds of the litigation) do not apply to “dispute resolution proceedings”. For this purpose dispute resolution proceedings means international commercial arbitration, court proceedings arising out of an international commercial arbitration, and mediation and conciliation proceedings arising out of those court proceedings or an international commercial arbitration.
- A third-party funding contract, where the third-party funder funds the costs of a party to those proceedings in return for a share in any proceeds that party receives, relating to such “dispute resolution proceedings” shall not be treated contrary to public policy or otherwise illegal or void.
Further regulation is also likely as the amendments provide that criteria for third-party funding contracts can be prescribed by the Minister for Justice, Equality and Law Reform including criteria “relating to transparency in relation to funders and recipients”.
The Bill is currently at the Committee Stage and will move to the Report and Final Stages in the Dáil, before being considered by the Seanad and enacted. Timing for these stages is not yet confirmed.