Nationals fear green lawfare may use loophole

Nationals senators fear a parliamentary report has proposed a legislative ‘loophole’ exempting activist groups from a government crackdown on litigation funders.

Queensland Nationals senator Susan McDonald. Picture: Matt Taylor

Nationals senators fear a parliamentary report has proposed a legislative “loophole” exempting activist groups from a government crackdown on litigation funders, making it easier for them to pursue class action cases against major regional projects.

The parliamentary joint committee on corporations and financial services has urged the government to consider carving out not-for-profit litigation funders from its changes aimed at reducing the ability of international investors to exploit class action cases to rake in huge profits. 

The carve-out was recommended by the government-dominated committee after concerns were raised about the adverse impact the new regime would have on the Australian Farmers Fighting Fund, a special litigation funder linked to the ­National Farmers Federation that provides financial backing to protect farmers.

The Nationals and the NFF lobbied for the exemption, but Queensland Nationals senator Susan McDonald told The Australian the exemption would also apply to other charitable funds and not-for-profit groups, including activist charities that would be encouraged to wage class action “lawfare” against important ­regional projects.

She warned that the exemption could be exploited by the Environmental Defenders Office, a charitable group that raises funds for environmental legal cases and has been pursuing a High Court case against Queensland’s New Acland coalmine.

“It doesn’t sit well that ­organisations such as those who would be also captured under this exemption, as recommended, are organisations that raise money from people who are on the other side of the world and can obtain funding from the EDO, an ­organisation which received state government funding which runs contrary to the government approvals process,” Senator Macdonald said.

“A very specific example is New Acland mine outside Toowoomba. The Acland community have been a great advocate of the project.”

The parliamentary committee recommended the exemption apply to not-for profit litigation funders who held charitable ­status at the time the new regime entered into force in August, had not run more than three class ­actions in the past five years and existed “solely to support and protect the members of the associated charitable entity”.

UNSW law professor Michael Legg said the exemption could extend to environmental activist groups.

“Environment charities such as Lock The Gate would likely qualify, even though some of their litigation seeks to protect society or the public interest more gen­erally than just members,” Professor Legg told The Australian.

The EDO and the Lock The Gate Alliance have been fierce opponents of Adani’s Carmichael coalmine in Queensland and operate specialist litigation funds that hold a deductible Gift Recipient status with the Australian Taxation Office.

NSW Nationals senator Perin Davey said she supported the committee’s recommendation as it stood.

However, she suggested more consultation could close any loophole allowing not-for-profit environmental charities or other litigation funders to register charitable arms and begin pursuing class actions.

NFF chief executive Tony Mahar said the exemption was “not ideal” but “better than nothing” because of the benefits for the Australian Farmers Fighting Fund.

The new regulations, introduced by the Morrison government in August, require litigation funders for class actions to hold a financial services licence and ­operate as a managed investment scheme.

Labor has opposed the regu­lations, arguing that they increase costs for plaintiffs in class actions.