The Rising Threat of Lawfare and Lessons That Can Be Learned from Australia
September 10, 2024
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Over the weekend, former Australian Minister for Foreign Affairs and High Commissioner to the UK Alexander Downer wrote an opinion piece in the Daily Express on the rise of lawfare and litigation funding in Australia and why it matters from a UK perspective. Downer rightly highlights that regulation of the litigation funding sector in the UK is “light-touch” and cautions against moving in the same direction as Australia, which he describes as the “lawfare capital of the world.”
Fuelling the class action surge
Downer’s article is a sobering reminder about the threats of an increasingly litigious culture in the UK, particularly the threat to British businesses, where there has been a huge uptick in class actions fuelled by a growing litigation funding sector. This practice allows third-party funders to finance lawsuits in exchange for a share of the settlements, turning the legal system into an extractive tool rather than a mechanism for justice. As a result, businesses face growing legal costs and uncertainty, which diverts resources away from innovation and growth.
Lessons from Australia
Downer quotes a new report by the Menzies Research Centre showing that the litigation funding industry has quadrupled in Australia over the last decade, much of it fuelled by foreign capital. This remarkable growth of the sector will not come as a surprise to those following events in the UK over the same period, where today there are over 70 funders operating in the market. Downer writes that the previous administration in Australia enacted reforms that required litigation funders to hold government licences, subjecting them to regulatory oversight like any other financial product. However, he notes that these measures were scrapped by the new government.
As we argued in our most recent publication, Establishing Fairness in Litigation Funding, the almost total lack of oversight of and safeguards in the TPLF sector makes it an outlier in UK financial services, where there are strict rules governing how consumers interact with sophisticated financial products. The idea of having some sort of government license to operate in the UK might be a useful starting point in helping establish a more credible system that protects British business and consumers, not just the funders and claimant law firms.
The Rising Threat of Lawfare and Lessons That Can Be Learned from Australia
Over the weekend, former Australian Minister for Foreign Affairs and High Commissioner to the UK Alexander Downer wrote an opinion piece in the Daily Express on the rise of lawfare and litigation funding in Australia and why it matters from a UK perspective. Downer rightly highlights that regulation of the litigation funding sector in the UK is “light-touch” and cautions against moving in the same direction as Australia, which he describes as the “lawfare capital of the world.”
Fuelling the class action surge
Downer’s article is a sobering reminder about the threats of an increasingly litigious culture in the UK, particularly the threat to British businesses, where there has been a huge uptick in class actions fuelled by a growing litigation funding sector. This practice allows third-party funders to finance lawsuits in exchange for a share of the settlements, turning the legal system into an extractive tool rather than a mechanism for justice. As a result, businesses face growing legal costs and uncertainty, which diverts resources away from innovation and growth.
Lessons from Australia
Downer quotes a new report by the Menzies Research Centre showing that the litigation funding industry has quadrupled in Australia over the last decade, much of it fuelled by foreign capital. This remarkable growth of the sector will not come as a surprise to those following events in the UK over the same period, where today there are over 70 funders operating in the market. Downer writes that the previous administration in Australia enacted reforms that required litigation funders to hold government licences, subjecting them to regulatory oversight like any other financial product. However, he notes that these measures were scrapped by the new government.
As we argued in our most recent publication, Establishing Fairness in Litigation Funding, the almost total lack of oversight of and safeguards in the TPLF sector makes it an outlier in UK financial services, where there are strict rules governing how consumers interact with sophisticated financial products. The idea of having some sort of government license to operate in the UK might be a useful starting point in helping establish a more credible system that protects British business and consumers, not just the funders and claimant law firms.
Seema Kennedy OBE, Executive Director, Fair Civil Justice
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