The issue of third party funding of litigation recently came before the High Court for the first time. Persona, the company that lost out to ESAT Digifone in the award of the State’s second mobile phone licence in 1996, brought an action against the Minister for Public Enterprise, Ireland and the Attorney General alleging various irregularities and seeking damages. Owing, it claimed, to the wrongdoing of the defendants, Persona did not have the money to fund the litigation without the help of a third party funder and therefore entered into a funding agreement with a UK litigation funder in March 2015.
Litigation funding
Under the medieval concepts of maintenance and champerty, the funding of litigation in Ireland by a third party, particularly in return for a share in the proceeds of the litigation, is unlawful. Persona is therefore seeking a declaration from the High Court that its funding arrangement does not offend against these concepts and does not amount to an abuse of process. As a preliminary issue, the defendants sought disclosure of the litigation funding agreement. In reaching its conclusion that a redacted version of the agreement should be disclosed to the Court and the other parties, the High Court referred to another recent decision of the Court of Appeal in relation to the use of an After the Event (ATE) insurance policy in litigation.
ATE insurance
ATE insurance provides cover for the legal costs incurred in bringing (or sometimes defending) litigation. It is purchased after a legal dispute has arisen and generally protects a plaintiff from potential exposure to the costs of the litigation. In its decision, the Court of Appeal accepted that an ATE policy can, in principle, provide security for costs once it can be shown that the policy is actually effective and does not contain terms which would allow the insurers to contractually avoid liability to pay the costs of the defendant to an action. While the market for ATE policies is still quite limited in Ireland, and questions surrounding their validity still remain, the decision in this case marks a significant step in this area.
The High Court is due to deliver its ruling on the validity of the funding agreement in Persona shortly. This has the potential to alter the litigation funding landscape in Ireland forever.
Contributed by Deirdre O’Donovan.
