Proposed regulation of litigation funders in Australia
Previously, litigation funders in Australia were subject to a requirement to have “adequate” practices in place for managing any conflicts of interest that may arise. In May 2020, the Australian government announced proposals to require all litigation funders operating in Australia to hold an Australian Financial Services Licence (AFSL) and to conduct class actions in compliance with the managed investment scheme (MIS) regime.
Omni Bridgeway has long supported the introduction of a licensing regime for all litigation funders operating in Australia. The company (as IMF Bentham) applied for and obtained an AFSL in 2005, believing at that time that litigation funding could be a financial product. Once it became clear that it was exempt from a licensing requirement, in April 2013 Omni Bridgeway gave up the licence we previously held but continued to comply with regulations put in place that are overseen by ASIC. Under the regulations, funders are required to have “adequate practices for managing” any potential conflicts of interest.
Over the years we made submissions in support of licensing for funders, most recently, in our submission to the federal parliamentary inquiry into Australia’s class action regime and the role of litigation funding. Once the new requirements were announced in May 2020, Omni Bridgeway applied for and was granted an AFSL in September 2020 (via our wholly owned subsidiary Omni Bridgeway Investment Management Ltd). We believe we were the first dispute funder to be granted a licence under the new regime.
In this filmed discussion, Clive Bowman and Jason Betts both expressed their support for appropriate regulation of litigation funders in Australia. Jason said he thought the introduction of an AFSL was not a seismic change for the litigation funding market and that responsible funders like Omni Bridgeway have been embracing that proposal for some time (and indeed previously held an AFSL). He said that having a prudential requirement and an asset presence in Australia makes a lot of sense. However, what was less clear was how the funding of class actions would fit within the MIS regime, and how that would be addressed in the legislation. Jason and Clive agreed the MIS provisions would require some modification and also clarification on how the provisions will apply to litigation funding and also how they will affect current class actions, as well as those due to be commenced.
Clive also said it was important for the new regime to apply fairly and evenly to create an even playing field and therefore for funders to be defined to include lawyers acting on a ‘no win no fee’ basis or funding a case on a contingency fee basis.
Click above to view this film or see the video library on our website for other episodes of Clive and Jason’s discussion.