Labor looks to wind back class action funding laws

Contentious restrictions on how class actions could be funded may be wound back, as Labor pushes for a ‘fairer’ process.

The Albanese government is looking to wind back contentious restrictions on how class actions could be funded introduced by the previous federal government. Picture: iStock

Contentious restrictions on how class actions could be funded that were introduced by the previous federal government may be wound back by draft regulations the new government ­argues will make the process fairer for people who unite to take group legal action.

“The Albanese government has today released draft regulations which unwind the previous government’s unfair treatment of class-action plaintiffs,” ­Attorney-General Mark Dreyfus and Assistant Treasurer and Financial Services Minister Stephen Jones said on Friday.

Under litigation funding schemes and arrangements, an entity that is not a party to the litigation pays the costs of the ­action or indemnifies parties from adverse costs orders in return for a share of the proceeds if the litigation is successful.

The Corporations Amendment (Litigation Funding) Regulations 2020, introduced by then treasurer Josh Frydenberg, were hotly debated at the time. Some analysts said they created significant uncertainty and regulatory burden for the funding industry.

The proposed new regulations would “reinstate the longstanding exemptions from the Australian Financial Services ­Licence, managed investment scheme and other corporate regulatory regimes for litigation funders that existed prior to the August 2020 changes”, the statement reads.

The intention of the proposed new regulations is to “facilitate access to justice rather than … hamper Australians’ access to funding for class actions”.

In June, a full Federal Court decision held that it was wrong to regard funded class actions as ­investment schemes.

Opposition legal affairs spokesman Julian Leeser said class-action law firms were among the Labor Party’s biggest donors. “Despite its virtue signalling, this is another example that shows Labor has no integrity on integrity,” Mr Leeser said.

Submissions about the proposed regulations are now open and conclude on September 30.

A spokesman for class-­action specialist law firm Slater and Gordon said it welcomed the release of the draft regulations.

“Slater and Gordon has been a vocal critic of the former government’s changes, which sought to capture litigation funding arrangements within the managed investments regime in the Corporations Act,” they said.

Louise Petschler from the Australian Institute of Company Directors said while the institute had been supportive of the changes made by the previous government to implement safeguards to protect class members, it also respected the decision to reverse them.