Peers have warned that plans to extend the jurisdiction of the Competition Appeal Tribunal risk creating a ‘US-style lawyers’ charter’.

The Consumer Rights Bill, currently nearing its final stages in the House of Lords, will give the CAT power to hear collective claims and approve collective settlements.

The Department for Business, Innovation and Skills says the changes will give civil courts greater flexibility and strengthen protection offered to consumers.

During the report stage in the House of Lords yesterday, the government saw off amendments that would have placed more restrictions on the powers of the CAT.

Conservative peer Lord Hodgson of Astley Abbotts called for amendments to ensure consumers receive compensation due to them, rather than to third-party funders and lawyers.

He warned of ‘500-pound legal gorillas’ that the CAT would have to deal with if its jurisdiction was extended and accused the government of ‘casually preparing to open’ a Pandora’s box to potential claims.

‘The CAT would find itself in the front line of legal wrangling of a type and range which, by reason of its past experience, it was ill-fitted to handle.’

Conservative peer Viscount Eccles said similar moves in Australia had created ‘considerable trouble’ around the authorisation of those conducting class actions or collective proceedings.

He added: ‘No one would dream of accepting any form of settlement in this field without taking good legal advice. That would apply to defendants as well.

‘Nevertheless, the endeavour should be that the benefit does not go to what you might call the legal outriders: claims managers, hedge funds and so on.’

BIS minister Baroness Neville-Rolfe (pictured) said rules written into the bill will require the CAT to consider the strength of claims and the availability of alternative dispute resolution.

She explained that CAT rules will come under further scrutiny with a formal consultation in the new year, ahead of the bill coming into law. The minister said the bill should retain discretion for hybrid claims involving more than one group of claimants.

The Competition Act 1998 already enables specified consumer bodies to bring damages claims on behalf of consumers on an ‘opt-in’ basis.

However, very few of these cases have materialised and the government decided more action was needed to facilitate damages actions.

The bill will also give the CAT jurisdiction to hear standalone claims, not based on a decision from the Competition and Markets Authority for example, and the power to grant injunctions.