December 2022: Class Action change is here with more to come…

As noted in our post on 4 September 2022, the Albanese Federal Government was seeking submissions from participants in the class action industry in respect of its proposal to wind-back class action funding-related legislation implemented by the previous Federal Government.

Following that process, the current Federal Government enacted the Corporations Amendment (Litigation Funding) Regulations 2022 (Cth) which commenced on 10?December 2022.?Relevantly, the Regulations now provide an explicit exemption for class action litigation funding schemes from:

1.????the managed investment scheme regime;

2.????the requirement to hold an Australian financial services licence (AFSL) (and associated requirements); and

3.????the product disclosure regime and anti-hawking provisions in the Corporations Act 2001 (Cth).

However, the class action litigation funding schemes are still required to comply with conflict of interest requirements as a condition of their exemption from the AFSL regime (which largely reflects the requirement prior to the changes implemented by the previous government).

The Regulations are not unexpected.?They provide greater clarity for participants in the class action industry, are consistent with recent developments in Australian case law and reflect the Albanese Federal Government's position that "The Act’s MIS and AFSL regimes were not designed or intended to regulate the litigation funding industry".

The changes are likely to instil greater confidence for litigation funders and may lead to an increase in the number of class actions filed in 2023.?These outcomes (if they come to pass) are consistent with the Albanese Federal Government's desire to support access to justice for class action plaintiffs.

In our view the Regulations likely signal the beginning of further class action reform.?As part of announcing the Regulations on 16 December 2022, the Government indicated that it continues to consider the recommendations of the Australian Law Reform Commission regarding class action proceedings and third party litigation funders (which were set out in a report dated January 2019).?It is currently unclear how many of the report's recommendations are to be considered.

We will continue to follow any new developments.?For further queries or information relating to recent developments in class actions more generally, please contact us.