(Reuters) – Australia is considering covering fees for litigants and lawyers and guaranteeing a minimum return for the plaintiff in its latest challenge to the industry following a sharp rise in costly class actions.
The Australian Government last year to tighten statutory scrutiny of wealthy offshore and local court funders following a sharp rise in successful class action lawsuits against companies in recent years.
Dispute financiers invest in consumer, investor and other lawsuits from groups that cannot afford them by financing them in exchange for a share of all settlements or judgments. If the group of the plaintiff loses, it does not have to repay the financial investor.
Companies such as Omni Bridgeway Ltd., formerly IMF Bentham and Maurice Blackburn, have funded more than 300 class actions in Australia, including against the country's major banks.
A parliamentary report in December stated that Australia's light touch rules had created a global hot-spot for investors based in tax havens and with "dubious corporate histories" that generated huge returns.
It suggested 70% of gross income may be a minimum return for members of class action.
“This measure is of particular importance to ensure that successful applicants receive adequate compensation in their cases and to prevent disputation financiers and law firms from incurring disproportionate fees in the process. ", Said Treasurer Josh Frydenberg in a joint statement with the country's Minister of Justice.
Dispute financiers, however, believe that such a limit would be prohibitive for small cases in view of the high risk and expensive nature of such lawsuits. In some cases, a ceiling of 30% of gross returns would not even cover legal costs, a PricewaterhouseCoopers LLP paper prepared for Omni Brideway in March showed.
"The Government's proposed ceiling on the return to litigation is a dangerous attack on the rights of legal Australians and will lead to companies' errors being left unchecked," said Andrew Watson, national head of class action at Maurice Blackburn, a law firm.
"Dispute financiers play a very important role in allowing access to justice for ordinary Australians who would otherwise not be able to afford legal action against the right injustices. '
Lawyers and financiers have received an average of 41
Earlier this year, the government proposed legislation to permanently slow down the rate of listed companies' so-called "continuous disclosure obligations", and protect companies and their executives from misleading eading and fraudulent conduct unless "wrong" is proven.
The government will consult on the proposed minimum return guarantee before making a final decision this year, it said.