Third Party Funding of Litigation is Prohibited

April 2016

Persona Digital Telephony Limited and another –v- the Minister for Public Enterprise and Others

The Irish High Court has recently (20 April 2016) considered the legality of litigation funding arrangements with a professional third party funder and whether such arrangements contravene Irish rules on maintenance and champerty.

“Maintenance” is the giving of assistance or encouragement to one of the parties to an action by a person who has neither an interest in the action nor any other motive recognised by law as justifying this interference.  “Champerty” occurs where an unconnected person seeks a share of the proceeds of litigation in exchange for funding that litigation.

The Irish High Court observed that notwithstanding there is a long line of authorities in this jurisdiction relating to maintenance and champerty issues, the application before it was the first of its type to come directly before the Irish courts.  The High Court examined the authorities and also issues around public policy.  Observing that maintenance and champerty continue to be torts and offences in this jurisdiction, the Court ruled that there is a prohibition on an entity funding litigation in which it has no independent or bona fides interest for a share of the profits.   Professional third party funding agreements give rise to legal impropriety which offend the maintenance and champerty rules.

The High Court expressly noted that it had not been asked to consider the constitutionality of the Irish rules on maintenance and champerty.  That leaves open the issue to a future date and the final determination of issues around access to justice and whether these ancient torts and offences are truly in accordance with Irish law will await such a constitutional challenge.

The Judgment of the High Court in this case provides some clarity around the legality of third party funding arrangements in this jurisdiction.  However the question is not finally resolved and will not be resolved until a constitutional application comes before the Courts.

For more information, contact your usual Whitney Moore contact or John Lynch in our Litigation Group.

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