ASIC Class Order [CO 13/897]

Administered by Department of the Treasury

Legislation au F2013L01374 Not in force Legislative Instrument

Legislation content

ASIC CLASS ORDER [CO 13/897]

EXPLANATORY STATEMENT

Prepared by the Australian Securities and Investments Commission

National Credit Code

 

The Australian Securities and Investments Commission (ASIC) makes ASIC Class Order [CO 13/897] under subsection 6(17) of the National Credit Code (the Code), which is found in Schedule 1 to the National Consumer Credit Protection Act 2009 (the Credit Act).
 

Subsection 6(17) the Code provides that ASIC may exclude from the application of the Code the provision of credit of a specified class.

 

1. Background

 

The High Court of Australia held in International Litigation Partners Pte Ltd v Chameleon Mining NL (Receivers and Managers Appointed) [2012] HCA 45 that the litigation funding agreement in that matter was a “credit facility” within the meaning of regulation 7.1.06 of the Corporations Regulations 2001 (the Regulations) and specifically excluded from the definition of a “financial product” under subparagraph 765A(1)(h)(i) of the Corporations Act 2001 (the Act).

 

Accordingly, the litigation funder was exempt from the requirement to hold an Australian financial services licence. The High Court considered the definition of “credit” in subregulation 7.1.06(3) of the Regulations and held that this litigation funding agreement was “credit” because it was a form of financial accommodation provided by the litigation funder to the litigant and its provision “for any period” will be a “credit facility”. Under the litigation funding agreement, the litigation funder had agreed to pay the litigant’s legal bills within 28 days of receiving written notification. The litigant in turn agreed to reimburse the litigation funder if the proceedings were resolved in its favour.

 

The decision of the High Court has highlighted that, depending on the terms of a litigation funding agreement, a litigation funding arrangement or a proof of debt funding arrangement may amount to the provision of “credit” to which the Credit Act and Code applies.

 

On the 9th of January 2013, ASIC made Class Order [CO 13/18] to enable the temporary operation of a litigation funding arrangement and a proof of debt funding arrangement without compliance with the requirements of the Credit Act and Code until 12 July 2013. This is to allow time for the Government to consider its policy position on the regulation of litigation funding arrangements and proof of debt funding arrangements.

 

2. Purpose of the class order

 

This class order will extend the relief in CO 13/18 to enable the temporary operation of a litigation funding arrangement and a proof of debt funding arrangement without compliance with the requirements of the Credit Act and Code until 12 July 2014. This is to allow further time for the Government to implement regulations for the purposes of exempting litigation funding arrangements and proof of debt funding arrangements from the Credit Act.

 

3. Operation of the class order

 

The class order has the effect of extending the exclusion period in CO 13/18 for litigation arrangements or a proof of debt arrangements from regulation under the Code and the Credit Act   

 

The class order has effect until 12 July 2014. This is to align the sunsetting of the relief to similar relief made under Class Order [CO 13/898] for litigation arrangements or a proof of debt arrangements that is funded by conditional costs agreements. 

 

4. Consultation

 

ASIC consulted with the Department of Treasury before making this class order. ASIC did not undertake further consultation as it provides relief only for a short period pending the Government’s decision.  

 

 


Statement of Compatibility with Human Rights

 

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

 

ASIC Class Order [CO 13-897]

 

This class order is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

 

Overview of the class order

 

ASIC Class Order [CO 13-897] will extend the temporary operation of a litigation funding arrangement and a proof of debt funding arrangement without compliance with the requirements of the Credit Act and Code until 12 July 2014. The objective of [CO 13-897] is to allow time for the Government to consider its policy position on the regulation of litigation funding arrangements and proof of debt funding arrangements under the Credit Act and Code.


Human rights implications

 

This class order does not engage any of the applicable rights or freedoms.

 

Conclusion

 

This class order is compatible with human rights as it does not raise any human rights issues.

 

Overview

The Australian Securities and Investments Commission (ASIC) made ASIC Class Order [CO 13/897] in 2013 under the National Credit Code, which is part of the National Consumer Credit Protection Act 2009. The class order was introduced to address the gap highlighted by the High Court of Australia in International Litigation Partners Pte Ltd v Chameleon Mining NL (Receivers and Managers Appointed) [2012] HCA 45. The Court ruled that certain litigation funding agreements could be considered "credit facilities," bringing them within the scope of the Credit Act, unless specifically exempted. This ruling prompted ASIC to issue the class order to allow temporary operation of litigation and proof of debt funding arrangements without full compliance with the Credit Act and the National Credit Code until 12 July 2014. The primary objective of this class order is to provide additional time for the Government to develop its policy on the regulation of such funding arrangements, ensuring that they are appropriately governed under existing legislation.

Scope and Application

ASIC Class Order [CO 13/897] applies to the temporary operation of litigation funding arrangements and proof of debt funding arrangements, allowing these arrangements to proceed without the need to comply with the requirements of the National Consumer Credit Protection Act 2009 and the National Credit Code. This class order extends the relief previously granted by Class Order [CO 13/18] to provide additional time until 12 July 2014 for the Government to determine its policy stance on regulating these types of funding arrangements. The order aims to give certainty to market participants and allow for a review period before any new regulations are introduced. It is a Commonwealth instrument and, as such, has a national reach. The class order does not specify any exclusions, exemptions, or thresholds; it applies broadly to any litigation or proof of debt funding arrangements operating under the terms specified. The order is compatible with human rights, as it does not engage with any of the rights or freedoms recognised in the international instruments listed in the Human Rights (Parliamentary Scrutiny) Act 2011.

Key Provisions

The main operative sections of ASIC Class Order [CO 13/897] (the Class Order) extend the temporary relief provided by a previous class order, ASIC Class Order [CO 13/18], which allowed the operation of litigation funding arrangements and proof of debt funding arrangements without compliance with the requirements of the National Credit Code (the Code) and the National Consumer Credit Protection Act 2009 (the Credit Act) until 12 July 2013 (section 2). The Class Order extends this period until 12 July 2014, to allow further time for the Government to implement regulations exempting these arrangements from the Credit Act (section 2). The Class Order is designed to provide a temporary solution until a permanent regulatory framework is established (section 2). The Class Order imposes certain obligations and requirements on the parties involved in litigation funding and proof of debt funding arrangements. Specifically, it allows these arrangements to operate without the need for compliance with the Credit Act and the Code for the extended period, until 12 July 2014 (section 3). This means that the entities engaged in these activities do not have to hold an Australian financial services licence or comply with the licensing requirements under the Credit Act and the Code during this period (section 3). The Class Order is intended to provide clarity and certainty for these arrangements until the Government implements a permanent regulatory framework (section 3). There are no specific offences, penalties, or consequences outlined in the Class Order itself for breach of its provisions. However, it is important to note that the Class Order is a temporary measure, and any operation of litigation funding or proof of debt funding arrangements beyond the specified period without compliance with the Credit Act and the Code could result in legal consequences. The Credit Act and the Code provide for various offences and penalties for unauthorised credit activities, including fines and imprisonment (section 6(17) of the Code). It is essential for parties involved in these arrangements to ensure compliance with the Credit Act and the Code once the temporary relief provided by the Class Order expires (section 6(17) of the Code).

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Area of Law
Consumer Law
Financial Law
Instrument
Class Order
Concepts
Commencement Provisions
Exemptions & Exclusions
Regulatory Standards
Catchwords
Credit Arrangements

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Sourced from the Federal Register of Legislation at 26 August 2026. For the latest information on Australian Government law please go to https://www.legislation.gov.au.