Third-party funders could be publicly expelled from the body that regulates them under a new complaints procedure set up by the Association of Litigation Funders (ALF), which was welcomed by the Civil Justice Council today.

The complaints procedure, written by barrister Joanna Smith QC, sets out how complaints against any of ALF’s eight funder members will be dealt with.

Complaints will initially be investigated by ALF’s general counsel, who will report her findings to the ALF board. The board may then refer the matter to independent legal counsel for an opinion and to recommend sanctions where appropriate.

Where complaints are upheld, possible sanctions set out in the procedure include expulsion from ALF or suspension of membership, publication of the independent counsel’s opinion, or a public or private rebuke. ALF also has the power to impose a low-level fine up to a maximum of £500, likely to be used for technical breaches.

The procedure allows for appeals against complaints decisions.

ALF chair Leslie Perrin, who is also chair of funder Calunius Capital, said the new complaints procedure was a necessary part of self-regulation of the industry.

While accepting that the impact of the procedure will be limited by the fact that it can only apply to those funders that are members of ALF, he added: ‘Expulsion from ALF is a pretty serious consequence for those who want to do business in England and Wales.

‘At Calunius, we have just closed our second fund [raising £30m]. We couldn’t have done that if we hadn’t had ALF membership; there is no way we would have got the money…. this is front of mind for investors.’

As well as the new complaints procedure, ALF has also updated its code of conduct to reflect the requirement introduced last year for all funder members to have at least £2m of capital, and has amended its definition of a funder to include the position where funds are held by a corporate subsidiary.

The CJC said it 'wishes the ALF success in its continued efforts to progress and achieve a successful and robust regime of self-regulation for litigation funding in England and Wales'.