Third-party litigation funding (through which investors fund someone else’s case in exchange for a percentage of damages if they win) does not normally receive much mainstream attention in the UK, given that it is a relatively small sector here.

But last week the House of Lords devoted considerable floor time to debating the potential dangers of this method of funding, as peers discussed an amendment to the Legal Aid, Sentencing and Punishment of Offenders bill. The amendment, which was eventually withdrawn, sought to introduce statutory regulation into the sector, instead of a new voluntary code of conduct which was published in November.

The Lords were most worried about the prospect of third-party funding (which, at present, is almost entirely focused on commercial cases) being introduced into areas involving individual litigants, such as personal injury. Funders could potentially offer to finance a claimant’s case in return for a cut of their personal injury compensation.

In that context, there is a clear argument for proper statutory regulation to protect an individual claimant who, unlike a corporate client, might be in a vulnerable position when negotiating a deal with funders. But in my view the practice should not be banned outright, given that, for some claimants, it might be the only way of bringing their case and obtaining access to justice. After all, under the Jackson reforms, solicitors will be able to take a share of personal injury claimants’ damages, limited to 25% of the compensation.

But what about commercial cases?

One of the arguments frequently made against third-party funding in commercial litigation is that it fuels unmerited claims. Those who oppose litigation funding often point to the US as a dangerous example of the kind of litigation frenzy that would develop, if we allow funders to establish themselves here to the same extent as they have done across the Atlantic. Indeed, an allusion was made during the Lords debate to problems arising from ‘the American type of litigation’.

But it is often forgotten that there is a fundamental difference between litigation in the UK and the US: namely, the adverse costs rule. While in the US, funders who lose a case do not face the prospect of paying the other side’s costs if they lose, here they do. That in itself is enough to ensure that third-party funding will not lead to a rise in weak cases being brought in the UK courts; and indeed many believe that it is the lack of an adverse costs rule, rather than the presence of third-party funders, that truly lies behind the litigation excesses of the US.

In the UK, far from taking a gung-ho approach to litigation, funders are remarkably cautious, and in fact most will not touch a case unless it has a 70% prospect of success. That’s hardly fueling unmerited litigation. It would be interesting to know how many cases financed by litigation funding actually win; but that information is normally subject to client confidentiality.

Returning to the House of Lords debate, peers also noted that Lord Justice Jackson, in his final report, said that while a voluntary code of conduct should be established for third-party funding, this should be ‘re-visited’ if and when the funding market expands. The voluntary code was published, and approved by Jackson, only last November. But as the Lords debate drew to a close, Lord McNally suggested that: ‘It is a question of whether [third-party funding] has now expanded to a point where the matter should be re-visited’.

I would suggest that, by approving the voluntary code less than three months ago, surely it can be inferred that Jackson does not believe the market has yet expanded to require more than self-regulation at the current time. Otherwise, surely he would not have only just put his weight behind self-regulation?

With third-party funding expected to begin playing a more central role once the civil justice reforms come into force in April next year, we can expect to hear plenty more views emerge on this developing and controversial funding sector in the coming months.

Rachel Rothwell is editor of Litigation Funding magazine

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Those Aussies just can’t resist a bit of competition.

From their cricket team beating us with depressing regularity in the 1990s to Paul Hogan ('you call that a knife?'), it seems a nation devoted to one-upmanship. So we shouldn’t be too surprised to see an Aussie law firm this week muscling into the UK legal profession with all the subtlety of a Prisoner Cell Block H plotline.

Slater & Gordon announced on Monday it would buy UK firm Russell Jones & Walker for the best part of £54m. The deal, which includes RJW’s Claims Direct brand, is comfortably the largest buy-out of the alternative business structure era and lays down a marker for future purchases.

Legal reporting in recent months has become a minefield of hyperbole, treating every minor development as if it’s a seismic shift in the entire profession. But this is a game-changer. This is a top-100 UK firm, with a major claims farmer under its wing, being bought out by an investor with experience of both the stock exchange and the legal market.

The rhetoric may have been David Brent-esque ('we want to be the first train leaving the station') but the ambition is clear. This new collaboration aims to be the most recognised brand in the country and has the finance and starting position to achieve it.

Of course, none of the doom-mongers’ fears surrounding ABSs have gone away, indeed they will only be magnified by the borrowing required to finance this deal. Slater & Gordon is in the business of making money first and we must not forget that. But any decent board of directors will know this is only achieved through running a good practice, and the lessons of the banking big bang of the 1980s must surely have been learnt in this respect.

Neither will firms be left high and dry by nouveau-riche partners at RJW running off into the sunset with a hefty cheque: 78% of the deal involves shares protected until 2015. Even if partners can then sell, how many would want to cash in if the share price is still rising?

Buying a law firm is a risky business. The market is changing fast, not to mention the regulations that (in theory) govern it.

And what do you actually get for your millions? A building, staff contracts and perhaps a water cooler or two. There is no stock, no assets and no land ripe for redevelopment.

But in the spirit of the crocodile-taming Hogan, these Aussies are not afraid of a challenge. This new entrant means business in every sense of the word.

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The House of Lords debate which took place on 30 January revealed divided opinion on key issues in the proposed legislation in Part 2 of the Legal Aid, Sentencing and Punishment of Offenders Bill.

We now know the changes will be delayed. And emphasis was placed on the fact that the reforms are not actually ‘pure Jackson’ but only embody selected parts of Lord Justice Jackson’s report. For example, consider the replacement of after-the-event legal expenses insurance by ‘qualified one-way costs shifting’ (QOCS).

Liberal Democrat Lord Thomas of Gresford made a damning attack on exclusion of QOCS from the bill in favour of its introduction via the Civil Procedure Rules. He said ‘...The Civil Procedure Rules will come out of the air from somewhere and will not have any proper parliamentary scrutiny. They will have been drawn up as a result of discussion between the Executive and the Civil Procedure Rule Committee, which is entirely made up of judges and lawyers. I would have thought that there would be a constitutional position. It is more serious than anything else in the bill.’

Crossbench peer Baroness Butler-Sloss agreed, saying: ‘Perhaps the minister will not mind if I add a very few words. I had not intended to intervene but, as a former chairman of a rules committee, I have to say that I have considerable faith in the good sense of the way in which it does its work. But the points that have been made are extremely relevant. It is not really the business of a rules committee to change something so dramatic.’

Lord Beecham pointedly said to Lord Wallace of Tankerness, who was representing the government: ‘Perhaps, as he develops his reply, he would deal with the point of restricting this significant change to personal injury cases when Lord Justice Jackson advocated it across the piece.’ This raises clear professional conduct issues for the lawyer members of the Civil Procedure Rule Committee. If the Ministry of Justice provides notice under the Civil Procedure Act 1997 that rules be put in place, then the committee is required to do so. On the other hand, if there is a risk that it is being asked to breach constitutional law by exceeding its legal powers, then it has an impossible conflict of interest. Clearly there is little likelihood that any civil procedure rules will be drafted until this issue has been decisively resolved.

The Civil Justice Council confirmed to me by email on 31 January: ‘The Council was asked by the Ministry to come up with practical proposals on implementing QOCS (Part 36 and Proportionality). A working party was set up chaired by Alistair Kinley to look at these issues. The subsequent report was handed over to the Department in October; a workshop was convened to discuss the report attended by Departmental officials. The Council has had not been asked to carry out any further work since then’.

Lord Prescott meanwhile, the former deputy prime minister, focused on the role and impact of the press and media in bringing about the reforms. He said: ‘A survey has just come out - I do not know whether members have seen it - of 16 press organisations. It was conducted by the MoJ. Question one was: "Do you agree that CFA success fees should not longer be recoverable from the losing party in any case?".

'The answer was: "Yes, for the reasons set out in the response enclosed. UK law also needs to be amended to comply with Article 10 of the European Convention on Human Rights" - and that is quite apart from being shattered from our people claiming the human rights when they are spending most of the time trying to defeat it. But the point is that there are 16 identical replies - every one of the replies from television, radio, the Guardian, the Mail, Sky, BBC, was exactly the same, to all 60 questions. All of a sudden, when they are usually divided about many issues, when it comes down to money, all 60 answers are that they should keep their position. Even the good old liberal Guardian sided with Dacre, for God's sake - that takes a bit of thinking about.

'They are now agreed that they should be able to keep more of their money, even though they are the ones that transgressed in this situation.

‘For those 16 to get together-some lawyer has written the answer to every one of them. If a trade union did that, we would be in trouble. It would be all over the front pages: "60 identical replies, it must be a conspiracy". Of course it is a damn conspiracy. That they have come together in this survey to give exactly the same answers is perhaps not a crime, but it is near to it. They have the power for to do it.’

He went on to say: ‘Believe me, this press is not going to go away; it is still going to be committing the same offences. We have a Press Complaints Commission that is particularly useless and will continue to be unless we make fundamental changes. Anyone listening to the Leveson inquiry must hear that the press has not changed its mind; it is still going to go ahead and do the same things because that is how it sells newspapers.'

In what seemed to be a significant Conservative ‘about-turn’ Lord McNally replied: ‘We have to await the outcome of the Leveson inquiry.’

Alluding to the encouragement of ‘professional rogues’, Lord Bach observed: ‘It is only common sense that we should not seek to legislate for a system of litigation that allows professional people to prey on their impecunious and weak clients. The Committee today is full of professional people of one sort or another and the House is even more full of them when it is sitting.

‘As we all know, being in a profession is a privilege. When a professional takes on contractual fiduciary and moral duties to do their best to help their clients, they take on an important responsibility. We have professions in our society because we need experts who specialise, whether it is expertise in finance, in my example, the law, engineering or medicine.

‘They should know that society takes seriously if and when they act negligently, with malice, or breach their duty of care. Should we make it so difficult for the individual to take action and claim back their damages in full? Would that not have a corrosive impact on trust in the professions and their regulation, which is something that professions and the professionals themselves should not and do not welcome.

‘We think that the answer to this dilemma is to listen to what Lord Justice Jackson said and extend one-way costs shifting to all litigation, not just keep it to personal injury.’

He continued: ‘Should we fail to do this, and leave the bill unamended, the perpetrators of the Payment Protection Insurance mis-selling scandal - the mortgage mis-selling scandal of the 1980s and 1990s which noble Lords will remember - and thousands of other instances when rogue professionals have abused their position of trust, will go unpunished and unheard.

‘Their victims will multiply in a system where those who have been wronged are dissuaded from taking action against rogues, knowing that parliament will have legislated to substantially limit their rights to redress. It would be something of a rogues' charter.

‘I end what I have to say about this amendment by citing the views of the president of the Professional Negligence Lawyers Association, who said that many litigants face the dilemma of having had their trust betrayed by one professional adviser and that their only redress by way of litigation is to risk remaining assets and perhaps insolvency by trusting another - meaning another professional adviser - to win their case. That is not a satisfactory position and we ask the government to think again.’

The government has already conceded that personal injury claims including claims against medical professionals will have the benefit of qualified one way costs shifting. However, the justification to sweep away recoverable success fees and ATE premiums from every other category of civil litigation without even providing ‘qualified one way costs shifting’ in their place is becoming harder and harder to understand.

The legal aid cuts in Part I were all justified by the government’s need to cut the costs to the tax payer. The inability of the Conservatives to justify Part 2 (as seen above there is a clear difference in the Liberal Democrat position in the Lords) by reference to any savings to the taxpayer leaves open to speculation the question of they wish to bring about these reforms at all.

Lord Prescott is the only one who seems to have an explanation. If he is right, then these reforms are being implemented for reasons of political expediency for which ordinary people - like us - are expected to sacrifice our ability to enforce our civil rights. It is perhaps mischievous to suggest that if the Conservatives would go this far - would they go one step further and reintroduce slavery?

Katy Manley, is president of the Professional Negligence Lawyers Association

You can’t help but feel sorry for the less glamorous half of a partnership.

Shunted to the side, often ignored and with their other half stealing all the glory: theirs is a life destined for second best.

In the LASPO bill, civil litigation plays the part of this downtrodden after-thought, constantly in the shadows of the arguments raging around legal aid.

If this were a queue for a nightclub, civil litigation would be standing at the back in the cold whilst legal aid waltzes in with a VIP pass. It is Lyle Lovett to Julia Roberts, the scarcely noticed bridesmaid to legal aid’s beautiful bride. Even the full name of the bill - Legal Aid, Sentencing and Punishment of Offenders - leaves it out in the wilderness, like an unloved cousin left off a wedding invite list.

So far, understandably, discussions and debates have centred on the government’s plans to cut legal aid for most civil cases - in its huge a vitally important subject. In the Commons, prolonged hours of these disputes left just 20 minutes for civil litigation; in the Lords, we seem to have spent most of 2012 on the minutiae of legal aid.

Finally, today sections 43 and 45 of the bill come up for debate. The chance for civil litigation to step into the spotlight, like an understudy summoned for action when the lead actor calls in sick. It’s relatively easy to understand the arguments around legal aid. The government says we spend too much and wants to shave £350m a year from the budget. You can agree or disagree, but the basic elements are fairly straightforward.

On civil litigation, explaining the issues to laymen leaves you staring at blank faces (believe me, I’ve tried). The public, and certainly the government, seem to believe costs are too high and litigation too easy to launch. Yet how do you address those issues without denying access to justice for those who really deserve it?

The government wants to ask claimants to pay up to 25% of their legal costs from their compensation and take on cases without the benefit of after-the-event insurance. Will this help to reduce costs or simply deny justice for those who haven’t asked to be injured or defamed?

Should Chris Jefferies, his reputation trashed by sections of the media in the wake of the Joanna Yeates murder, have been forced to go into battle with newspapers without the scales tipped in his favour? Or the family of Milly Dowler? Or the parents of a severely disabled child left in that condition because of medical negligence at birth?

These are enormous issues, yet they have barely raised a headline in the mainstream media (it should be noted, incidentally, that in the government’s consultation most news outlets advocated scrapping ATE insurance and success fees).

Whichever side of the fence you sit, this is a debate that needs to be heard and given proper consideration. Legal aid has had its moment in the spotlight for now. Now is the turn of civil litigation - we can only hope the Lords still have the energy.

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