On 22 May 2020, Australian Treasurer Josh Frydenberg announced that the federal government will repeal regulations which currently exempt litigation funders from the requirement to obtain an Australian Financial Services Licence and from the obligations imposed upon entities operating managed investment schemes.
This announcement comes a little more than a week after Australian Attorney-General Christian Porter announced a parliamentary inquiry into litigation funding, including an examination of “…the consequences of Labor’s decision in 2012 to exempt litigation funders from licensing requirements and prudential supervision.” Pursuant to the Attorney-General’s media release, the Committee conducting the inquiry (the Parliamentary Joint Committee on Corporations and Financial Services) “…will be asked to report back to Parliament by 7 December and its work will complement the work already done in this area by the Australian Law Reform Commission.”
Given that the Committee has not yet even held a hearing in relation to the inquiry, and having regard to the inquiry’s stated timeline, the announcement by Treasurer Frydenberg seems premature and is inconsistent with the government’s own process.
Noting that the ALRC in its Final Report entitled “Integrity, Fairness and Efficiency—An Inquiry into Class Action Proceedings and Third-Party Litigation Funders” made no recommendation that the exemptions be repealed, it is unclear what problem the government believes the repeal of the exemptions will solve, let alone whether their repeal is tailored (narrowly or even at all) to address such a problem. Given only 9 days elapsed from the date the Attorney-General announced the inquiry to the date of the Treasurer’s announcement, it is difficult to believe that the requisite inquiries were undertaken by the government before the decision to repeal the exemptions was made, and, as such, that decision is likely to be ill-informed.
Lexvestor welcomes any process which engages all litigation funding stakeholders and fairly balances their interests to facilitate a fair, cost-effective and efficient regulatory framework which does not create unnecessary hurdles for the provision of funding to meritorious plaintiffs. Despite the shifting regulatory landscape and concerns about the adequacy of the government’s process, Lexvestor is committed to providing meritorious plaintiffs with the capital that they require to access justice.