ASIC Class Order [CO 14/569]

Administered by Department of the Treasury

Legislation au F2014L00976 Not in force Legislative Instrument

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ASIC CLASS ORDER [CO 14/569]

EXPLANATORY STATEMENT

Prepared by the Australian Securities and Investments Commission

National Credit Code

 

The Australian Securities and Investments Commission (ASIC) makes ASIC Class Order [CO14/569] 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 9 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 was to allow time for the Government to consider its policy position on the regulation of litigation funding arrangements and proof of debt funding arrangements.

 

On 11 July 2013 ASIC made Class Order [CO 13/897] to extend the operation of [CO 13/18] to 12 July 2014 to enable the Government more time to consider its position on litigation funding.

 

 

 

 

2. Purpose of the class order

 

Class Order [CO 14/569] will extend the relief in [CO 13/18] to further 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 2016. This is to allow further time for the Government to consider its position on whether to exempt litigation funding arrangements and proof of debt funding arrangements from the Credit Act.

 

3. Operation of the class order

 

 Class Order [CO 14/569] amends [CO 13/18] by replacing "12 July 2014" in paragraph 5 with "12 July 2016".

 

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 14/569]

 

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 14/569] 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 2016. The objective of [CO 14/569] 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) enacted ASIC Class Order [CO 14/569] under the National Consumer Credit Protection Act 2009. This class order was introduced to address a gap in the regulation of certain financial arrangements that could potentially be considered as "credit" under the National Credit Code. The class order provides temporary relief from the requirements of the Credit Act and Code for litigation funding arrangements and proof of debt funding arrangements, allowing them to operate without compliance until 12 July 2016. This extension follows the High Court's ruling in International Litigation Partners Pte Ltd v Chameleon Mining NL, which identified that such arrangements could constitute credit. The objective of the class order is to allow the government more time to consider the appropriate regulatory framework for these arrangements. The class order was made following consultation with the Department of Treasury and is deemed compatible with human rights as it does not engage any of the applicable rights or freedoms.

Scope and Application

The ASIC Class Order [CO 14/569] applies to the temporary operation of litigation funding arrangements and proof of debt funding arrangements without requiring compliance with the National Credit Code and the National Consumer Credit Protection Act 2009, until 12 July 2016. This legislative instrument is designed to provide additional time for the Australian Government to deliberate on the regulatory approach towards these specific financial practices. The order extends the relief previously granted by Class Order [CO 13/18] and further amended by Class Order [CO 13/897], thereby maintaining the status quo in the interim period while the government considers its regulatory stance. The class order applies across the Commonwealth of Australia and extends to any entities or individuals involved in such funding arrangements during the specified period. The order does not specify particular exclusions or thresholds, but it is noted that the relief provided is temporary and contingent on the government's decision regarding future regulation. The order may be further extended or modified through subsequent subordinate instruments as necessary.

Key Provisions

The main operative sections of the ASIC Class Order [CO 14/569] (paragraphs 2 and 3) extend the temporary operation of litigation funding arrangements and proof of debt funding arrangements without compliance with the requirements of the National Credit Code and the National Consumer Credit Protection Act 2009 (the Credit Act) until 12 July 2016. This extension aims to provide additional time for the Government to deliberate on the regulation of these arrangements under the Credit Act. The Class Order modifies the previous Class Order [CO 13/18] by adjusting the date from 12 July 2014 to 12 July 2016. The Class Order imposes specific obligations on the parties involved in litigation funding arrangements and proof of debt funding arrangements, allowing these arrangements to operate without full compliance with the Credit Act and the National Credit Code until the specified date. This temporary relief aims to ensure that these financial arrangements can continue without interruption while the Government reviews the regulatory framework. There are no explicit offences, penalties, or civil/criminal consequences detailed for breaches of the Class Order [CO 14/569] itself, as it is primarily a temporary measure to facilitate policy consideration. However, any breaches of the Credit Act or the National Credit Code that might occur during the period of this relief could result in penalties as stipulated under the Credit Act. These could include fines, imprisonment, or other civil or criminal consequences depending on the nature and severity of the breach. The exact penalties would be determined by the relevant provisions of the Credit Act.

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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.