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Legislation Permitting Third-Party Funding of Arbitration Enacted

AUTHORs: Nicola Dunleavy, April McClements co-author(s): Ruadhan Kenny, Tina Turner, Róisín Peart DATE: 10/07/2023

Third-party funding of international commercial arbitration is now explicitly permitted in Ireland. 

Certain Supreme Court judgments had previously cast doubt on the status of third-party funding in Ireland (as discussed in our previous insight on this topic here). However, the position has now been placed on a firm statutory footing following the signature into law by the President of the Courts and Civil Law (Miscellaneous Provisions) Act 2023 (the "Act") on 5 July 2023. 

The legislation, which is wide-ranging and covers many different areas, was amended during its passage through the Oireachtas to also include provisions confirming that the current restrictions on third-party funding of litigation in Ireland do not apply to international commercial arbitration.

Those amendments proposed that a new section 5A be added to the Arbitration Act 2010, providing 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 those court proceedings or an international commercial arbitration; and
  • 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.

No changes were made to the wording of the above provisions during the remaining stages of debate in the Oireachtas and the new section 5A of the Arbitration Act 2010 has now become law, subject only to its commencement by way of Ministerial Order. 

Third-party funding of litigation in Ireland continues to be prohibited by the rules against maintenance and champerty. A much-anticipated Law Reform Commission Report is awaited in relation to that prohibition before there is likely to be any broader legislative change. 

If you would like to know more about this topic, please contact commercial litigation partners Nicola Dunleavy and April McClements, senior associate Ruadhán Kenny or your usual Matheson contact.