By Neil Rose


Hedge funds, investors and other third-party funders of litigation may have to show the courts the colour of their money to bring transparency and fairness to their nascent industry, the Gazette can reveal.



That was the consensus of a top-level forum convened last week by the Civil Justice Council (CJC), bringing together lawyers, judges, funders, insurers and regulators. It was broadly agreed that the Civil Procedure Rule Committee should be asked to beef up the security for costs regime, so that both claimants and defendants can be sure the funder will not 'cut and run' without paying up.



Third-party funding is quickly establishing itself in England and Wales for high-value cases. The forum was held to consider whether - and what - regulation would be required to ensure that it develops in a stable way, without a repeat of the costs wars that have plagued conditional fee agreements. The Gazette's sister publication, Litigation Funding, had exclusive access to the event.



Requiring funders to provide security for costs, as well as disclosure to some extent of the funding arrangement, would discourage rogue traders, it was argued. There was also a consensus that more formal regulation may be required, and that the regime currently applied to claims management companies could be extended to accommodate this.



CJC chairman Sir Anthony Clarke, the Master of the Rolls, told the Gazette: 'I am in principle a supporter of third-party funding, provided that appropriate regulation is put in place.



Russell Wallman, the Law Society's director of government relations, said: 'An encouraging degree of consensus has emerged about the need to avoid the unnecessary regulation of third-party funders, while ensuring that claimants are fully advised about the arrangement they are entering into. We think this consensus will provide a sound basis for consultation on the possible rules of court.'



- The forum will be reported in detail in the February issue of Litigation Funding.