A US lobby group has called for immediate government regulation of third-party litigation funding.
The increasing influence of third-party funders has caused controversy on both sides of the Atlantic. Both the US, and England and Wales, currently have voluntary regulation, but there have been repeated calls for statutory bodies to set down rules.
The US Chamber of Commerce for Legal Reform last week issued a report urging the Federal Trade Commission to step in. It said: ‘Third-party investments in litigation represent a clear and present danger to the impartial and efficient administration of civil justice.’
It noted external companies increased the volume of ‘abusive litigation’ and were willing to bet money on cases that might be weak but had a chance of a large reward. Third-party funding compromises the independence of lawyers, the group added, by making them feel an obligation to the funders.
It called for disclosure of funders’ input in lawsuits and limits on their involvement with law firms.
Several litigation funders operate in both the US, and England and Wales, where the market is expected to grow as legal aid cuts and civil litigation reforms make cases harder to fund.
A spokesman for the Ministry of Justice told the Gazette there are no plans to change the voluntary code set out last November by the Civil Justice Council.
The Law Society has backed the work of the council and called for ‘clarity’ about the duties of the funders and their clients. Mark Beaumont, business development manager from national firm Just Costs, dismissed the US group’s call.
‘Large firms often find it preferable to bury claimants under excessive costs, rather than settle genuine claims,’ he said.
‘Funding removes this weapon from their armoury and puts previously weak claimants on a level playing field.’