Defendants who succeed in commercial disputes should not be able to claim back their costs from professional claims funders as it would hinder access to justice, the High Court has ruled.

However, one law firm hit by the judgment has urged the government to intervene before defendant solicitors are deterred from accepting cases where such funders are involved.

The issue arose in the maritime dispute Arkin v Borchard Lines, where the claimant, former shipping company director Yeheskel Arkin, brought his 80 million case under a conditional fee agreement (CFA) but was struggling to fund expert witnesses.

His legal team set up a contingency fee agreement with funders Managers and Processors of Claims (MCP), with MCP paying for experts in return for 25% of any damages.

Mr Arkin subsequently lost his case and the defendants sought some 6 million in costs from MCP.

They argued that MCP's financial interest in the litigation made it a party to the proceedings and therefore liable to pay up.

However, Mr Justice Coleman ruled that companies such as MCP played an important role in commercial litigation.

'If all professional funders were by definition to be subject to non-party costs orders, there would be no such funders to provide access to the courts to those who could not otherwise afford it,' he argued.

London firm Gordon Dadds acted for MCP.

Partner Cormac Cawley predicted that the decision would create a level playing field where lawyers take on cases on a CFA basis and clients cannot afford to pay for experts.

But Tim Reynolds, partner at London firm Constant & Constant, which acted for one of the defendants, said it may appeal as the decision would encourage an unfair growth industry, with law firms bearing more risk than professional funders.

He called on the government to make a policy decision on balancing the rights of defendants with access to justice.

'This should be decided by the legislature and not by judges,' he insisted.

'It is an incredibly difficult balance to reach.'

Marjorie Holmes, a partner at City firm Davies Arnold Cooper, one of the other defendant practices, said the ruling showed no compassion for defendants and risked driving companies out of business.

'If they win they get no costs and if they lose they get no costs,' she said.

'That is not equal justice.'

A spokeswoman for the third defendant firm, City practice Berwin Leighton Paisner, said it was not left out of pocket as it had agreed with its clients that they would bear the costs.

The other two firms have similar agreements.

By Paula Rohan