Third-party funders face tougher rules

The Association of Litigation Funders (ALF) is to bolster measures to protect clients whose litigation is funded by third-party investors.

Writing in the February edition of the Gazette’s sister publication Litigation Funding, the ALF’s chair, Leslie Perrin, reveals that the body will introduce tougher rules to ensure that members hold adequate amounts of capital.

The ALF will require all funder members to have at least £2m of capital, a figure to be reviewed annually. This builds on the association’s original requirement that funders should have enough capital to fund cases ‘for a minimum of 36 months’, without specifying a minimum amount.

Funder members will also need to be audited annually by a recognised audit firm.

Perrin said: ‘Just as the availability of litigation funding is now widely accepted as important to improving access to justice, so too is ensuring that litigation funders have the capital they need to fulfil their commitments.’

He added: ‘The new provisions make the ALF quality mark impossible to ignore when solicitors are advising their clients about litigation funding, and where to start in their search for it.’

ALF is a voluntary association set up by funders in November 2011 to enable the industry to regulate itself. A spokesman for the Civil Justice Council, which facilitated and endorsed the ALF’s creation, described the new measures as ‘sensible and progressive’.