The question of whether third-party investment in litigation should be regulated by government raised its ugly head one final time in the House of Lords last week.

Lord Thomas of Gresford had tabled an amendment to the Legal Aid, Sentencing and Punishment of Offenders bill calling for statutory regulation of third-party funding, despite a new voluntary code of conduct having only recently been set up to enable self-regulation of the sector, with approval from Lord Justice Jackson and the Master of the Rolls.

Thomas withdrew his amendment at committee stage to allow the government to reflect further on the issue, but it reappeared for a final airing during last week’s report stage, when Thomas reiterated his belief that statutory regulation would be ‘far better’ than a voluntary code.

In his response last week, justice minister Lord McNally made it clear that the government has no intention of foisting government regulation on the third-party funding sector at this point in time; but he was careful to point out that it will be keeping a watching brief.

McNally said: ‘We are grateful to [Thomas] for raising this issue. It is a possible problem and a number of… Lords and lawyers outside have given warning signals.

‘At the moment we are looking at how voluntary regulation is working in the area. However, the Lord Chancellor is very aware of the situation and is keeping it under review.

‘We do not think that statutory regulation through this bill is either the right place or the right time, but we welcome the fact that [Thomas] has put this issue on the political radar.

‘Both lawyers and legislators will have to follow the matter closely to see whether we will need to return to it at some future date.’

McNally asked Thomas to withdraw the amendment, which the peer did, adding: ‘My purpose was to highlight the insidious advance of third party litigation funding. It is essentially an American concept that has advanced into this country.

‘So far it has reached commercial litigation, with which I have no quarrel.

‘It has also got into family law and I shall be extremely concerned if it were to get into personal injury cases.’

Given that the voluntary code was only agreed and approved last November, Thomas’ amendment was always a bit of a long shot. There hadn’t been any signs from government that it was in any great hurry to bustle in and seize responsibility for regulating the sector.

But where Thomas has been quite successful, is in using the LASPO bill to shine a spotlight onto the industry, and achieve commitments from government that it will keep a close eye on developments.

The new Association of Litigation Funders will not only need to ensure that it properly monitors compliance with the new voluntary code, but just as importantly, it must make sure that it is seen to be doing so. The more transparency, the better.

McNally may have hammered the final nail into the coffin for statutory regulation for the time being, but I wouldn’t rule out a resurrection in the next couple of years.

Rachel Rothwell is editor of Litigation Funding magazine, providing in-depth coverage on the financing of litigation, including the latest developments in third-party funding