Comment: Irish legal sector can benefit from Brexit

As the sole remaining Anglophone EU member state, with a legal system similar to that in English, Ireland has a unique opportunity

4th January, 2021
Comment: Irish legal sector can benefit from Brexit
‘With the right resources, Ireland’s courts can continue to offer a robust and reliable alternative to London, where the legal sector contributes more than £25 billion a year to the exchequer‘. Picture: Getty

Ireland is well placed to capitalise on the uncertainty caused by Brexit to become a destination of choice for complex international litigation. It will be the sole remaining Anglophone EU member state with a legal system very similar to the English system in many respects, offering the same range of legal remedies and tools, and with the added benefit of the EU’s seamless mechanisms for the recognition and enforcement of judgements. With the right resources, Ireland’s courts can continue to offer a robust and reliable alternative to London, where the legal sector contributes more than £25 billion a year to the exchequer.

A welcome development from Brexit has been the Ireland for Law initiative, a key part of the Government's Brexit Strategy, which aims to position Ireland as a jurisdiction of choice for agreements and business disputes.

Chaired by John Bruton, the former Taoiseach, the strategy has seen considerable success with businesses increasingly opting for the certainty of transacting through Irish law. For example, the publication of an Irish law version of the ISDA master agreement has seen increasing uptake from institutions that prefer to continue trading under an EU member-state law with EU court jurisdiction clauses.

The government’s promised investment in the courts system is essential if Ireland is to compete with the new common law courts set up specially to attract complex international disputes in civil law countries, such as France and the Netherlands.

That they felt compelled to create these courts is testament to the attraction of the common law, which provides reliable and relatively predictable outcomes for businesses caught up in disputes. Whereas litigants who opt to have their disputes resolved in Paris or Amsterdam still have to contend with the local law and the lack of precedent if they need to appeal, which makes outcomes far less predictable. The relative certainty of our justice system, bolstered by our constitution, gives Ireland an important edge over these newcomers.

In terms of enhancing Ireland as a jurisdiction of choice, the recent publication of the Report of the Review of Civil Justice Group, chaired by Peter Kelly, the former president of the High Court, is another positive development and it’s crucial that the proposals are now given serious consideration, with at least some measures being prioritised for implementation.

The Review Group in part of its work considered reform measures taken and their effects in other common and civil law jurisdictions, as well as developments at a European level. With respect to collective actions, the Review Group found that there is an objective need to legislate for comprehensive multi-party litigation in Ireland and it recommended the introduction of a Group Litigation Order procedure similar to that in England and Wales. The implementation of such a measure, either in that or a varied form is important, as although countries such as the Netherlands and Germany each have sophisticated mechanisms for such litigation, our common law system would be advantageous for litigants given its relatively reliable and robust nature.

Collective actions are often backed by professional litigation funders and colleagues around the world frequently remark on Ireland’s prohibition of such funding, a facility that businesses regularly avail of in other countries to hedge the risk of complex disputes. Funders filter out weak claims and only take on claims if they are likely to see a return on their investment, aiding the timely operation of the courts. Commonly a company may have obtained a valuable judgment or arbitral award but to actually get paid it may need to sue to enforce the judgment or award. Litigation funders will finance the litigation required, usually on the basis that they will take a share of the amounts recovered. Similarly, banks and other corporates are increasingly turning to funders to help manage their liquidity, by way of one-off funding and also “portfolio funding”, availing of litigation finance to avoid drawing on their own capital reserves in respect of litigation.

Litigation funding is prohibited in Ireland, although at this stage traditional public policy objections to the funding or “maintenance” of litigation by unconnected parties, deriving from medieval legislation, appear to be fairly obsolete and difficult to justify. Australia and the UK have, for example, permitted litigation funding for several years and London’s edge as a jurisdiction of choice has been significantly boosted by access to finance for litigation. This has not given rise to a major flood of claims, although in shaping any legislation we can learn from how Australia is now regulating litigation funding to ensure that litigants and funders benefit fairly from proceeds of claims.

Our Supreme Court has been clear that it cannot remove the prohibition on funding, which stems from laws from the 1600s, so any change requires legislation. Again the recent Report of the Review of Civil Justice Group has recommended that consideration be given to permitting liquidators and administrators to access litigation funding, which would be a step in the right direction. In January this year, a joint report by the EU Bar Association and the Irish Society for European Law strongly recommended that proper provision be made for litigation funding as an essential mechanism to access justice and the Law Reform Commission is examining the issue.

There are compelling arguments for legislating to permit multi party litigation and litigation funding both to improve access to justice and provide a vital alternative risk management tool to Irish businesses. It should be viewed as a strategic priority if Ireland is to compete for international legal services.

Karyn Harty and Catherine Derrig are both partners at McCann FitzGerald in Dublin.

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