A business-backed lobby group has called for regulation of third-party litigation funding in the UK after publishing research which shows that its use has shot up over the past six years.
The Justice not Profit campaign, backed by the US Chamber Institute for Legal Reform, which is affiliated with the US Chamber of Commerce, unveiled a report following an investigation into 16 litigation funders in the UK.
According to its analysis, the value of the global assets managed by litigation funders has jumped by 743% since 2009, and now stands at £1.5bn. The market has become increasingly lucrative, the report states, citing rising 2013/14 income at industry leaders Burford Capital and Juridica Investments.
Justice Not Profit said that, given these developments, the industry has ‘outgrown self-regulation’. It noted that in his 2009 civil justice review Lord Justice Jackson said that if the use of third-party litigation funding grew more significant, ‘full statutory regulation’ may be required. It said the market has now reached that critical point.
‘If left ungoverned, litigation funding stands as a troubling risk to the market and to litigation in the UK,’ the group said. It proposed regulation by the Financial Conduct Authority.
Justice Not Profit also pointed to a poll of 1,200 people, conducted by BritainThinks, which showed that 63% of those surveyed said they were either quite or very concerned about the increase use of for-profit litigation funding in England and Wales.
Arundel McDougall, executive director of the European Justice Forum, a coalition of businesses, individuals and organisations promoting fair civil justice laws, echoed calls for third-party funder regulation to help address public concerns.
‘We share the public anxiety expressed by this poll about third-party financing of litigation remaining unregulated. [Third-party litigation funding] is a derivatives market and the underlying asset is litigation. Bundles or rights are speculated as a commodity for profit by those whose attachment to the issues at stake is limited to generating a sufficient return on investment.’
Malgosia Fitzmaurice, a professor of public international law at Queen Mary University of London, said that action needed to be taken. ‘Given the huge public concerns about casino justice and the US-style justice system, the government and other key decision-makers must act now before trust in the system is further eroded.’
Litigation funders defended their business model. Louis Young, managing director of Augusta Ventures, said that funding enables access to justice for both individuals and small businesses who would otherwise not have the means to enforce their rights.
‘Like any financing business, of course, we look to make a profit out of it too, which is why it makes no sense to support spurious cases. All that would do is end up costing us money.
‘For these individuals and business owners, 80% of something is a lot better than 100% of nothing,’ he said.
Young accused Justice Not Profit of promoting the agenda of 'a select few large bodies and interest groups who find themselves as habitual defendants in cases across the globe, fronted by the US Chamber of Commerce. They are understandably alarmed that one of the key tactical weapons in their defence arsenal - delay and obfuscation until the other side runs out of funds - is now no longer effective’.