Plaintiff lawyers allege US foreign influence in Australian class action crackdown

Plaintiff lawyers have accused an affiliate of the US chamber of commerce of “foreign influence” for lobbying to tighten Australia’s regulation of litigation funding and class actions.

A fiery inquiry on Monday descended into claim and counterclaim regarding lobbying about the reforms, which plaintiff lawyers say will harm Australians’ access to justice by requiring litigation funders to comply with investment regulations.

Slater and Gordon made the accusation of foreign influence when incorrectly identifying the chamber affiliate the treasurer, Josh Frydenberg, met before making changes on 22 May requiring litigation funders to hold a financial services licence.

Liberal parliamentarians returned fire by arguing 14 plaintiff law firms and litigation funders had failed to adequately disclose they were behind the Keep Corporations Honest campaign and questioning whether a $100,000 donation to Labor was linked to favourable reforms enacted by the Victorian government.

On Monday, Shine Lawyers’ head of class actions, Janice Saddler, told the parliamentary joint committee on corporations and financial services there was already “intense scrutiny” on plaintiff lawyers and litigation funders, with no fees or commissions paid unless a judge was satisfied they were fair and reasonable.

Slater and Gordon’s head of class actions, Ben Hardwick, told the inquiry that without class actions the justice system would be “accessible only to the wealthy few”.

Hardwick said the federal Coalition’s reforms had the “unintended consequence” of harming access to justice by groups such as the National Farmers Federation’s Australian farmers fighting fund, which helped bankroll the case against Australia’s live export ban.

The Institute for Legal Reform, a US Chamber of Commerce affiliate, had made a submission to the inquiry urging more regulation of litigation funding. It said its members had an interest in how litigation was conducted in “plaintiff-friendly” Australia because they conducted business or carried on trade with Australia.

The institute has registered on Australia’s foreign influence transparency scheme, disclosing that it has engaged former Law Council of Australia president Stuart Clark’s SSC Advisory to undertake “parliamentary lobbying … in relation to class action and litigation funding reform”.

When answering questions on notice to the inquiry, Frydenberg’s office denied meeting the US Chamber of Commerce or the institute since 1 January.

The answers, seen by Guardian Australia, note the treasurer “met with an affiliate” of the chamber, the American Chamber of Commerce in Australia, by videoconference on 14 May.

Hardwick incorrectly suggested Frydenberg had met the institute, seizing on the meeting with the other affiliate to claim there was “clear evidence of foreign influence”.

Liberal MP Jason Falinski reiterated the treasurer and his office had “not ever met the US Chamber of Commerce” to discuss litigation funding and accused the plaintiff lawyers of dishonest tactics to prosecute their case.

The Keep Corporations Honest campaign argued the institute lobbied to reform Australia’s laws “after a series of wins for ordinary Australians against corporations, including a victory against US-based pharmaceutical giant Johnson & Johnson for faulty pelvic mesh implants”.

The Liberal senator James Paterson asked Hardwick whether Keep Corporations Honest had disclosed who was behind the campaign.

Hardwick replied there were “absolutely no secrets behind this campaign” because the initial press release stated it was funded by law firms and litigation funders.

He said campaign materials were not authorised because the campaign had legal advice they were “not political advertisements”.

Hardwick noted all 14 bodies were listed on the lobbying register as clients of Cornerstone Group and were therefore “fully transparent about the relationship to the campaign”. The register notes they are among 46 clients of the lobbyist but does not disclose any details about the campaign.

Maurice Blackburn’s head of class actions, Andrew Watson, confirmed the firm had lobbied the Victorian and New South Wales attorneys general to introduce contingency fees, an alternative method of funding litigation allowing lawyers to charge clients a percentage of the compensation won. The reform passed Victoria’s parliament in June.

Falinski asked about a $100,000 donation by Maurice Blackburn to the Australian Labor party on 26 March 2019, which freedom of information documents revealed was the same day directors of the firm had met the Victorian attorney general, Jill Hennessy.

Watson said he had “no idea” who attended the meeting but was “almost certain” contingency fees were not discussed because he was not in attendance. He said he had met Hennessy to discuss contingency fees only once.

Watson replied he was “not in a position to say” if the donation had been made but Maurice Blackburn was proud of its financial support to Labor and the trade union movement.

A Victorian government spokesman said “any suggestions of inappropriate behaviour are simply false”, insisting the reforms were based on independent advice from the Victorian Law Reform Commission and were designed to “make it easier to bring class actions for silicosis, wage theft and other forms of wrongdoing”.

Matthew Corrigan, the general counsel of the Australian Law Reform Commission, said “access to justice is a critical issue in Australia” and it was a “critical concern” that most could not afford to pursue court cases.

Corrigan said litigation funding protected defendants by providing security for costs in the event they won a case – something not provided when plaintiff lawyers worked on a no-win no-fee basis.

Tom Lunn, the senior policy manager of the Insurance Council of Australia, said Australia had become a “highly profitable” jurisdiction for class action, causing insurers to withdraw from the directors’ insurance market and a spike in premiums.

The insurance council-backed reforms including a licensing regime for litigation funders and action to “address inefficiencies such as multiple competing class actions”, he said, while calling for a review of Australia’s continuous disclosure laws.

Guardian Australia contacted Frydenberg and the institute for comment.


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