UK litigation funders have been left stunned by a ‘bizarre’ move by the Australian government to clamp down on the industry.
Federal treasurer Josh Frydenberg last week gave funders three months to become licensed by financial regulator the Australian Securities and Investments Commission (ASIC). He said that as the number of class actions facing businesses – mostly backed by litigation finance – has ‘tripled’ in recent years, it was now ‘even more important’ for litigation funding to be regulated.
Funders branded the decision ‘politically motivated’ and likely to dampen international competition. Neill Brennan, Sydney-based co-founder of UK funder Augusta, said: ‘There has been no consultation; the timing is bizarre. All we’ve had is a media release to say that the new regime will occur in three months, but it currently takes five months to be granted a licence [by the ASIC]. So even if we all applied for a licence today, it wouldn’t be possible.’
The regulatory grab appears unlikely to be replicated in the UK, however. Susan Dunn, chair of the UK’s Association of Litigation Funders, said that while the Australian move might get some anti-funding lobbyists in this country ‘excitable’, she believed that the UK would continue to adopt a ‘considered approach’, with statutory regulation of funding unlikely.
With no detail yet provided, funders are unclear whether the licensing requirement extends to the funding of all cases in Australia, or – as is broadly assumed – is intended to be restricted to class actions.
Brennan said that with no evidence of difficulties between funders and consumers, the licensing decision appeared to be ‘politically motivated’. He added: ‘Big business has got the ear of government and wants to reduce class actions against them.’
Neil Purslow, chief investment officer at Jersey-based Therium Capital Management, questioned whether the ASIC would want the regulation of funders ‘thrust upon it’, having concluded in 2018 that funding was better regulated through the courts.
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