Supplementary submission to ASIC on managing conflicts of interest in litigation schemes

  • Date:13 Mar 2013
  • Type:Policy Submission

On 13 March 2013, the Australian Institute of Company Directors, at the request of ASIC, provided additional comments in regard to ASIC Consultation Paper 185 – Litigation Schemes and Proof of Debt Schemes - Managing Conflicts of Interest.

We responded to the following two questions posed by ASIC:

  • Do you think that a funding agreement should include terms that impose a legally enforceable obligation on the funder to implement the proposals in this paper?
  • Are there any terms in a funding agreement that are necessary to manage conflicts?

Our submission re-iterated that litigation funders should be subject to a tailored licensing regime and that a conflicts of interest regime was only one aspect of an appropriate regulatory regime for litigation funding.  We stated that although litigation funders should be appropriately regulated and there should be a sensible mechanism for enforcement of the regime, we would not support the practice of ASIC issuing guidance which attempted to insert or mandate the terms to be included in the contractual arrangements between private parties.

However, in the event the guidance assisted users to balance the interests of litigation funders and group members, we recommended a number of terms which may assist in mitigating conflicts of interest. These included:

  • A ‘cooling off period’ for claimants entering into litigation funding agreements.
  • A term which allows claimants to override the instructions given by the funder to the lawyer.
  • A right for the group member to terminate a funding agreement if the litigation funder does not comply with the Regulations.
  • An obligation on the funder to disclose any breach of the Regulations to class members in writing.

Our additional comments followed our previous submission on this Consultation Paper dated 21 September 2012.

Download our supplementary submission to ASIC on managing conflicts of interest in litigation schemes (PDF 2MB).