Ireland: High Time To Review Prohibition On Litigation Funding

Last Updated: 5 September 2018
Article by Conor McDonnell, Michael Twomey, Tara Roche and Sinead Reilly
Most Read Contributor in Ireland, October 2018

The Supreme Court has again urged the legislature to consider whether the outright prohibition on professional litigation funding and the assignment of bare causes of action continues to be warranted as the ever-increasing cost of litigation is putting access to the courts beyond the reach of many.

While the Court accepted that this is an area in need of careful and considered legislative reform, it warned that unless a real effort is made by the legislature to improve access to justice, it will have "no option" but to step in, "undesirable and all as unregulated change might be."

The call for reform was made by Chief Justice Frank Clarke and Judge William McKechnie in their judgments in SPV Osus Ltd v HSBC Institutional Trust Services (Ireland) Ltd & Ors, in which the Court found that the assignee of a claim arising from Bernard Madoff's ponzi scheme fraud could not bring proceedings before the Irish courts as the assignment was contrary to Irish public policy.


In 2008, US company Bernard L Madoff Investments LLC (BLMIS) collapsed due to the large-scale fraud perpetrated by Mr Madoff, causing substantial loss to Optimal Strategic, an investment company that had invested almost all of its assets in BLMIS.

The trustee in bankruptcy of BLMIS admitted certain losses as "allowed customer claims", which carried an entitlement to be paid in priority in the liquidation. Optimal Strategic's allowed customer claim was valued at US$1.5 billion. It also had other claims against third parties arising from Madoff's fraud.

By 2010, a secondary market in trading in allowed customer claims in the BLMIS liquidation had emerged. In order to realise funds, Optimal Strategic set up a scheme to allow its shareholders sell their interest in the claim against BLMIS on the secondary market. As part of the scheme, Optimal Strategic assigned its allowed customer claim, together with its claims against third parties, to a vehicle called SPV Osus Ltd. Shareholders in Optimal Strategic exchanged their shares for shares in the SPV, and sold those shares to investors.

The end result was that 93% of the shares in the SPV were held by distressed debt investors.

The SPV then instituted proceedings before the Irish High Court against two HSBC entities which had acted as Optimal Strategic's custodian and administrator.

However, the Irish High Court and, on appeal, the Court of Appeal and Supreme Court found that the SPV was not entitled to maintain these proceedings as the assignment of Optimal Strategic's third party claims was void and unenforceable under Irish law.


Maintenance is the funding of litigation (normally by paying the costs) by someone with no legitimate interest in the litigation. Champerty is where someone with no legitimate interest in the litigation funds the litigation in return for a share of the spoils.

Since the 1600s, maintenance and champerty have been criminal offences and torts (civil wrongs) in Ireland.

The rationale for the prohibition on maintenance and champerty is to uphold the integrity of the litigation system, to prevent trafficking in litigation for profit, and to prevent people with an improper motive influencing litigation.

However, many argue that the prohibition restricts access to justice.


The assignment of a 'bare' cause of action involves the outright sale of a cause of action which is then pursued by the assignee (who has no interest or connection to the action other than that created by the assignment itself) to the exclusion of the original wronged party. Assignments of a bare cause of action – to use the archaic language of this area of law – 'savour' of maintenance and champerty and are void under Irish law.


In its 2017 decision in Persona Digital Telephony Ltd v Minister for Public Enterprise, the Supreme Court confirmed that professional third party litigation funding is not allowed in Ireland as it offends public policy. Professional third party litigation funding is where a commercial organisation, unconnected to the litigation in question, funds the litigation with a view to making a profit. (Read a previous article here)

In SPV Osus, the Supreme Court stated that the same principle must apply where a third party purchases a claim outright, removes the wronged party from his/her proceedings and converts their claim into a conduit for financial recovery by the assignee.


In his decision in Persona, the Chief Justice expressed serious concern about the negative impact the prohibition on litigation funding might have on an individual's constitutional right of access to justice. The Chief Justice called on the legislature to take action, cautioning that if it failed to do so and an individual's constitutional right of access to justice was breached as a result, the courts might have to step in to alter the parameters of the law of champerty.

One year on and the Chief Justice has stated that he remains "very concerned" that there are cases where persons or entities have suffered from wrongdoing but are unable to vindicate their rights because of the cost of going to court.

He emphasised that the best way of attempting to provide a solution is by means of legislation providing for a carefully regulated scheme. But he again warned that if the legislature makes no real effort to address this issue, a point might be reached where the courts may have to step in.

Judge McKechnie echoed his concerns, noting that the "position remains as dire" as it was when the Court first highlighted this issue in 2017.

Watch this space!

This article contains a general summary of developments and is not a complete or definitive statement of the law. Specific legal advice should be obtained where appropriate.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions