Regulations announced to support class actions
Minister for financial services, Stephen Jones, has welcomed new regulation to support access to justice for class action plaintiffs.
In August 2020, the former Government reversed regulatory exemptions for third-party litigation funders, a funding source for plaintiffs. This had increased the regulatory burden for funders and made it difficult for plaintiffs to access funding and have their day in court.
In the explanatory statement released in September at the time of the consultation, it said the “regulatory regime in the Corporations Act for regulating litigation funding schemes is not fit for purpose. Specifically, the MIS and ASFL regimes were not designed or intended to regulate the litigation funding industry”.
On 16 December, new litigation funding regulations were announced which would see litigation funding arrangemenst were generally exempt from the managed investment scheme, Australian financial services licensing, product disclosure and anti-hawking regimes in the Corporations Act 2001.
The Australian Securities and Investments Commission (ASIC) also said it had extended the following two reliefs which were due to expire on 31 January, 2023 until 31 January, 2026. This was to provide certainty for litigation funders and lawyers while the Government considered further policy positions for these arrangements.
- ASIC Credit (Litigation Funding-Exclusion) Instrument 2020/37 provides relief from the application of the National Credit Code in Schedule 1 to the National Consumer Credit Protection Act 2009 to litigation funding arrangements and proof of debt arrangements; and
- ASIC Corporations (Conditional Costs Schemes) Instrument 2020/38 provides relief from the requirements in Chapters 5C (managed investment schemes) and 7 (financial services licensing and disclosure) of the Corporations Act 2001 to litigation funding arrangements where the members wholly or substantially fund their legal costs under a conditional costs agreement.
Jones said: “These regulations reinstate those longstanding exemptions from the managed investment scheme, Australian Financial Services Licence and related corporate regulatory regimes for third‑party litigation funders.
“The Government continues to consider the recommendations of the Australian Law Reform Commission, with a view to ensuring the system produces fair and reasonable outcomes in class action proceedings.”
AUTHOR
Laura Dew
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