Opponents of litigation funding, and of the large-scale group litigation against corporate defendants that such funding makes possible, scored a sizeable publicity coup earlier this summer. A report warning that mass litigation could cost the UK economy £18bn made headlines throughout the legal press and beyond. This study was carried out by Brussels free-market thinktank European Centre for International Political Economy (ECIPE) and funded by business lobby group Fair Civil Justice. It highlighted how the UK has by far the largest number of collective actions in Europe, with many of the businesses targeted operating in sectors identified by the government as critical to economic growth: life sciences, advanced manufacturing and digital services. The report argued that the perceived threat of mass litigation is likely to hit investment in these sectors.
In a foreword to the report, Baroness Bowles of Berkhamsted (Liberal Democrat former MEP Sharon Bowles) said the report provided ‘rigorous evidence that the unchecked rise in mass litigation is not only distorting our legal system, but increasingly jeopardising the UK’s economic competitiveness, regulatory clarity, and investment climate.’
The ECIPE report has sparked criticism, with claimant firm Hausfeld’s global co-chair Anthony Maton, for example, publishing a detailed response this month taking issue with many of its claims. Maton argues that from a competition law perspective, litigation is far from ‘unchecked’. He notes that the changes brought by the Consumer Rights Act 2015 (CRA) to allow collective competition actions in the UK were ‘very carefully thought about and debated’, and subjected to much scrutiny from the courts – including appeals ‘brought by some of the best defendant firms in the country’. Maton also points out that one of the major drivers for the CRA reforms was to foster a more competitive economy.
Now we have the latest instalment in the information battle, in the form of a survey of business leaders commissioned by the International Legal Finance Association (ILFA), the results of which push back against the narrative that litigation funding is bad for the economy.
The survey of 765 UK business leaders was carried out in June this year by Stack Data Strategy on behalf of ILFA. The responses indicate that business leaders are generally supportive over the effect of litigation funding on the business environment, with 68% seeing it as a positive, and 7% as a negative. Nearly 80% said they would consider using litigation funding, 27% ‘definitely’ and 52% ‘probably’. The respondents were from businesses of all sizes.
The study also suggests that where businesses save money on litigation costs because they have used a funder, such savings could benefit the economy. Nearly half of respondents said they would reinvest any saved legal costs in technology and infrastructure; 44% would invest in new products and services; 38% would expand marketing and brand awareness; 25% would hire more staff; and 27% would provide employee bonuses or increase salaries.
In a separate study, Stack also polled more than 1,500 UK adults to test opinions on litigation funding. When told that funders cover legal expenses in return for a share of compensation, with consumers paying nothing if cases are unsuccessful, 76% of respondents said they would consider using the mechanism. Some 87% said it was important for consumers to have access to the Competition Appeal Tribunal for cases involving anti-competitive practices.
Usefully, perhaps, the survey showed that support for litigation funding is especially strong among Labour voters, with 82% willing to consider using it; six percentage points above the national average. Meanwhile only 43% of consumers said they felt confident challenging large companies alone, with 29% not very confident and 21% not confident at all. Three-quarters said they would consider using litigation funding to level the playing field when facing corporate wrongdoing.
It seems much of the argument around litigation funding is now becoming focused on whether the industry has a positive or a negative impact on the economy. No doubt the stakeholders on either side of the debate are attuned to the fact that, in the current financial climate, if they want to influence the direction of reforms, it is economic arguments that will capture the government’s attention more than anything else.
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