There is an “embarrassing” foreign influence on Australian laws, a plaintiff law firm has told a parliamentary inquiry into class actions, after revealing that Treasurer Josh Frydenberg met with an affiliate of the US Chamber of Commerce in May, shortly before announcing a crackdown on litigation funders.
Frydenberg announced reforms on May 22 that will see litigation funders subject to greater regulatory oversight, including by requiring them to hold an Australian Financial Services Licenses and comply with the managed investment scheme regime. Draft regulations were released last week and take effect on August 22.
During a hearing in the government’s latest inquiry into class actions and funders, Ben Hardwick, head of class actions at Slater and Gordon, observed that Frydenberg had met with an affiliate of the US Chamber of Commerce shortly before the regulatory changes were announced. Liberal MP Jason Falinski challenged this suggestion, questioning what, if any, evidence Hardwick had of the alleged meeting.
However, in an ‘answers to questions on notice’ provided to the parliamentary inquiry, the Treasury Portfolio revealed that Treasurer had met with the American Chamber of Commerce in Australia by video conference on May 14.
A unit of the US Chamber of Commerce, not-for-profit public advocacy organisation Institute for Legal Reform, has provided detailed submissions to the inquiry asserting that arguments for the regulation of litigation funders are “overwhelming”. The group declined an invitation to appear before the committee.
“There is an embarrassing foreign influence from the US Chamber of Commerce,” Hardwick told the inquiry.
“What we have seen is regulations brought in in a ham-fisted way last week and they will create chaos for class actions.”
According to Hardwick, the changes are “regulation for the sake of regulation” which will have “unintended consequences”, including capturing organisations such as the farmer’s fighting fund and other community groups which advance the interests of justice.
“[The new requirements] are completely inappropriate and it is unnecessary intervention for this Government to impose these types of regulation which frustrate everyday Australian’s ability to access justice,” Hardwick said, adding that applying the managed investment scheme requirements to funders was like placing “a square peg in a round hole”.
Andrew Watson, class actions principal at Maurice Blackburn, added that the managed investment scheme regime was “ill-adapted” for litigation funding, and said unintended consequences would flow “from what can only be described as a poor policy process”.
Both Maurice Blackburn and Slater and Gordon are financially backing a new campaign called “Keep Corporations Honest”, which aims to fight organisations trying to water down Australia’s class action system and ensure ligation funding remains available. The campaign claims that Australia is a target for the ILR and the US Chamber of Commerce due to recent class action victories against US corporations.
“The US Chamber of Commerce has established the Institute for Legal Reform (ILR), whose mission is to spend millions around the globe to water down class actions that threaten the interests of US corporations,” the Keep Corporations Honest website says.
“Australia has become a key target for the ILR 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.”
In a statement on Monday, Hardwick warned the government not to bow to such lobbying.
“We know the US Chamber of Commerce is lobbying furiously to reduce the impact of Australian class actions because they don’t like their multinational members, like Johnson and Johnson, being sued by regular Australians. It is important to recognise this and fight it. The pernicious influence of big money American-style business lobbying should have no place in Australian politics,” he said.
During Monday’s hearing, Falinski and the inquiry’s chairman, Victorian Liberal senator James Paterson, both questioned the transparency of Keep Corporations Honest, noting that the website fails to disclose all of the companies funding the campaign. Currently only six of 14 contributors are listed on the website, which was updated after Friday’s hearings, Paterson said, and he questioned whether they were registered as lobbyists.
“So we will find on the lobbyist register all 14 funders?” Paterson asked, telling Hardwick to carefully consider his answer, as a journalist had flagged during the hearing that they could not find all relevant entries.
Cornerstone has registered the eight law firms and six funders supporting the campaign, Hardwick said, and a press release was sent to all media outlets on commencement of the campaign.
“There is nothing to see here,” he said.
Lawyerly has reached out to the Treasurer’s office for comment.