A step closer to UK litigation funding reform?

Focus area

Comment

1.     

The development of TPLF in England and Wales

The report discusses how TPLF can facilitate access to justice but also highlights how it can be problematic. 

For example, TPLF can be harmful for vulnerable parties where TPLF may not be in their best interests. It can also promote the pursuit of unmeritorious litigation, reduce the prospects of settlement and funded claimants may also be at risk of being under-compensated.

2.     

The development of self-regulation of TPLF

The report highlights that the TPLF industry in England and Wales is now the second largest market in the world.  UK TPLF assets have increased from £198m in 2011/2012 to £2.2bn in 2021.

There has been a notable growth of TPLF in collective action proceedings.  As at March 2024, 27 collective proceedings before the Competition Appeals Tribunal were funded by TPLF. Three representative actions, and a further 25 proceedings, including group litigation, were also funded by TPLF in the High Court.

Questions are also raised of the Association of Litigation Funders’ Code and the concept of self-regulation.  The CJC Working Party is particularly interested in receiving submissions on what principles and best practices should inform the future development of TPLF, and those which could underpin the regulatory approach that is ultimately recommended.

3.     

The different approaches to regulation

Emphasis is put on the importance of identifying the most effective and proportionate regulation method for TPLF from a range of possible regulatory approaches.  Further, any recommendation concerning the regulation of TPLF by the Working Party should be evidence-based and account for the potential risks and harms that TPLF can cause.

4.     

The approaches to regulation in other jurisdictions

The report considers the different regulatory approaches in Australia, Austria, Canada, the EU, France, Germany, Hong Kong, Ireland, the Netherlands, Singapore and the US.  The report highlights the study undertaken by the EU and whether there is a need for the introduction of TPLF regulation in Member States.

5.     

The relationship between costs and funding

The report emphasises the significance of the relationship between costs and funding.  It looks at the circumstances where claimants and defendants respective bear the costs of funding. In particular, the Working Party welcomes evidence on transparency and the working of the TPLF market.

The report also examines litigation costs controls versus litigation funding costs, with the Working Party keen to understand more about funding costs.  The Working Party also notes that there is no review mechanism and it is keen to understand the degree to which flexibility in the final funding costs demands is exercised.

The report also explores costs capping orders as a means to controlling litigation costs and the impact of litigation funding on settlements. The Working Party is particularly interested to hear from those who have been involved in cases that have been harder to settle where the recovered costs are insufficient to compensate a claimant.  The report also highlights the burden of the costs of litigation funding, security for costs and the cost of regulation (including the impact of the current self-regulatory regime).

6.     

Other litigation funding options available

The report discusses other available litigation funding sources in addition to TPLF, namely self-funding, civil legal aid, Trade Union funding, legal expenses insurance, conditional fee and damage-based agreements, pure funding (litigation funding provided altruistically), crowdfunding, portfolio funding (funding arrangements with specific law firms) and supplementary legal aid schemes and contingency legal aid funds.