Disclosure of litigation funding arrangements in collective proceedings: a balancing act
This article was originally published by Thomson Reuters, April 2022.
There is a growing trend towards the use of third-party litigation funding (TPLF) in collective proceedings in the UK and globally. The disclosure of TPLF arrangements has recently come under close scrutiny by the Competition Appeal Tribunal (CAT) in the context of applications for Collective Proceedings Orders (CPO) brought against various large and prominent tech companies concerning claims of abuse of dominance.
In Kent v Apple Inc and another and Elizabeth Coll v Alphabet Inc and Others, the CAT refused to order the disclosure of the Proposed Claimant Representatives’ (PCR) After the Event Insurance (ATE) premiums and aspects of the fee agreements on the basis that such disclosure risked giving unfair tactical advantage to the Proposed Defendants.
The applications and the issues regarding the disclosure of funding arrangements were similar in both cases:
- In Kent, the PCR seeks a CPO on behalf of 19.6 million customers claiming to have suffered loss due to abusive conduct of the Proposed Defendants in relation to app distribution and payment processing services on certain of the Proposed Defendants’ devices, provided via its app store.
- In Coll, the PCR seeks a CPO on behalf of 19.5 million consumers claiming loss due to allegedly abusive conduct of various entities of the Proposed Defendants in relation to app distribution and payment processing services on certain devices provided by way of the Proposed Defendants’ store.
Request for disclosure
For the first Case Management Conference (CMC) in each action, the PCRs served documents including a Litigation Funding Agreement (LFA), an ATE policy, a litigation plan and litigation budget to trial. The PCRs requested that parts of the LFA and details of the ATE premiums should be redacted on the grounds of commercial confidentiality, strategic sensitivity, and privilege on the basis the information would give the Proposed Defendants an unfair tactical advantage in the litigation.
The Proposed Defendants objected and sought disclosure of the ATE premiums plus further information about the Conditional Fee Agreements (CFAs) between the PCRs and their respective funders. In particular:
- In Kent, the Proposed Defendants sought disclosure of the PCR’s ‘Solicitors Excess Provision’, which provides that where the solicitors’ fees exceed the budgeted amount stated in the PCR’s Litigation Plan Budget, the litigation funder will only fund excess fees above a certain threshold, in addition to the original amounts funded, meaning that excess fees below the threshold are at the lawyer’s risk.
- In Coll, the Proposed Defendants sought disclosure of the percentage level of the 'success fees' payable under the PCR’s CFAs on the basis that the CFAs gave rise to a potential conflict of interest between the PCR and class members, and the PCR and her lawyers.
The CAT’s rulings
A PCR’s funding arrangements are relevant to its assessment of a CPO application, particularly given that the CAT Rules 2015 and associated Guide to Proceedings require the CAT to consider the PCR’s financial resources and their ability to pay the Proposed Defendant’s recoverable costs, if ordered to do so.
The CAT ruled that, other than instances where privilege applies, it is in its discretion to determine whether a document should be treated as confidential, balancing issues of relevance with interests of confidentiality, as identified by the party making the request.
With this in mind, the CAT refused to order disclosure of the ATE premiums, the Solicitors Excess Provision in Kent and the percentage level of success fees payable under the CFAs in Coll, on the basis that:
- Whilst ATE premiums have been disclosed in other cases, it was not found here to be relevant to the determination of whether the PCRs would be able to fund their legal costs and be able to pay the Proposed Defendants’ recoverable costs. Those questions were determined by the information contained in the Litigation Budget and the level of cover provided by the ATE policy, both of which had been disclosed.
- Disclosure of the Solicitors Excess Provision was not relevant to the issues at the forthcoming CPO hearing, given that (1) it was not an amount relevant to the issue of whether the PCR had the ability to fund her own costs; and (2) it might disclose privileged legal advice on the merits of the case.
- The Proposed Defendants’ case that the success fees payable under the CFAs gave rise to a potential conflict of interest was not properly made out – the argument that there was a risk that the PCR’s legal team might not comply with their professional obligations was rejected.
These decisions will be relied upon by claimants, consumer groups and litigation funders to bolster an already increasing appetite to bring collective actions against multinational corporations, particularly those in the tech arena. Tech companies should therefore be aware of this increasing legal risk exposure.
ATE insurers will also welcome the decision, as information regarding their evaluation of claimants’ prospects of success currently seem unlikely to require disclosure at an early stage in such actions, potentially reducing the risks associated with writing ATE insurance.
Nevertheless, in Coll, the CAT emphasised the importance of transparency of funding in relation to a PCR’s funding arrangements in the context of collective proceedings and cautioned that it would be prepared to revisit the issue of disclosure during the course of the proceedings, whether that be on further application by the Proposed Defendants, or of its own volition.