The Federal Government has introduced legislation into Parliament that aims to prevent litigation funders charging excessive fees that are to the detriment of class action members.

Courts will be empowered to approve or vary the method for distributing claim proceeds to class action non-members, to ensure distributions are fair and reasonable, Treasurer Josh Frydenberg and Attorney-General Michaelia Cash said last week.

The bill establishes a “rebuttable presumption” that the distribution of proceeds is not fair and reasonable if more than 30 per cent is to be paid to funders and lawyers.

In other changes, plaintiffs will have to consent to becoming members of a litigation funding scheme before fees or commissions can be imposed, which the Government says will encourage “book building” and genuine support from participants.

The legislation, released in draft form at the end of last month for consultation, has been opposed by the Association of Litigation Funders of Australia and law firms such as Maurice Blackburn.

But an increase in class action costs has driven escalating directors’ and officers’ premiums in recent years and reforms have been welcomed by the insurance sector.

The Government says the legislation responds to Parliamentary Joint Committee on Corporations and Financial Services recommendations.

“These reforms, together with previous changes to require litigation funders to hold an Australian Financial Services Licence and comply with the managed investment scheme regime, demonstrate the Morrison Government’s commitment to ensuring that, when it comes to class actions, the interests of class members come first,” a statement from Mr Frydenberg and Ms Cash says.