The growth of alternative business structures has accelerated the need for statutory regulation of third-party litigation funding, a business lobbyist claimed today.
Mary Terzino, from the US Chamber Institute for Legal Reform, said conflicts of interest were ‘inherent’ if law firms and funders had shared ownership under an ABS.
Terzino said the need was now greater than ever to ditch the voluntary code set up in 2011 and protect clients whose cases are funded by third parties.
She said the industry was now worth £1bn worldwide but the UK and US had little statutory power to safeguard clients. ‘There are 25 funding companies in England and Wales but the Association of Litigation Funders [which adheres to the voluntary code] has only nine members,’ said Terzino, who was speaking at today’s Westminster Legal Policy Forum.
‘The voluntary code of conduct carries a lot of important safeguards but the only penalty for a breach is to be removed from the ALF – it is completely toothless for those who are not members.’
She added: ‘There remains a real potential for conflicts of interest, most significantly in England and Wales with looser rules about who can own law firms.’
Terzino was accused by audience member Michael Napier, chairman of Harbour Litigation Funding, of opposing third-party funding because it helped clients sue members of her organisation.
Leslie Perrin, chairman of the Association of Litigation Funders, said judges would act if cases are being run badly on purpose, and it was ‘implausible to say regulation will do any better than self-interest does’.
In his earlier address, Perrin said he saw ‘no prospect’ of statutory regulation and that the voluntary code was working. ‘It is extraordinary to think that a government would want to regulate purely commercial arrangements between purely commercial entities. I’m pretty bullish about the survival of voluntary regulation.’
Professor Rachael Mulheron, a member of the Civil Justice Council which drew up the code in 2011, said ‘nothing has changed’ since that time to necessitate reform.