Last week, I commented in both City A.M. and Law.com on the Government’s decision to delay the introduction of new legislation until after the Civil Justice Council’s (CJC) review is published, which is due next summer. At Fair Civil Justice, we welcome this decision and believe that it is a prudent move on the part of the Government.
The decision to delay any potential new legislation will allow all interested stakeholders an opportunity to engage further on the key questions that form part of the CJC’s consultation.
Profit over principle
The LFA (Enforceability) Bill, which was introduced earlier this year by the previous Justice Minister but ultimately dropped following the General Election, was flawed in a number of areas, and needed further time and consideration before coming in to law. One of my biggest concerns about the Bill was that it left the Third Party Litigation Funding (TPLF) sector practically untouched.
At its essence, litigation funding prioritises profit over the claimants’ best interests. Funders provide financial backing for cases in exchange for a portion of the winnings, creating a system where pursuit of profit overshadows the pursuit of justice.
This situation has meant that the unregulated TPLF sector in the UK is currently booming, with over 70 litigation funders currently active, of which the top 15 have seen their balance sheet assets soar from £6m in 2010 to £2.2bn in 2022.
The rapid growth of the unregulated litigation funding sector fuels the rise of group actions, which puts an enormous burden on British businesses. Group actions are no longer a merited last resort, but instead are actively pursued as a money-making strategy. In many cases this diverts consumers away from more effective and appropriate alternative dispute resolution mechanisms, and towards litigation, which is a drain on resources. Funds that otherwise would have been used to grow and innovate businesses and create jobs are lost on fighting litigation.
Why the delay in legislation is good news
Rushing complex legislation leads to unintended consequences, such as undoing safeguards for consumers and undermining the legal system. As Lord Ponsonby stated, and I agree, there needs to be “adequate safeguards to protect claimants from unfair terms.”
By engaging with stakeholders across sectors, such as consumer groups, corporates, academics, law firms and more, the CJC review will present a well-rounded perspective on litigation funding, inclusive of all voices. This review will encapsulate the broad range of issues, such as frivolous litigation, the influence of profit-driven funders on legal strategies and the unfair impact on the justice system. The speedy implementation of the LFA (Enforceability) Bill would not have taken into consideration such a broad range of views.
A new opportunity
Fair Civil Justice campaigns for more transparency in and stricter regulations on litigation funders to ensure that they are not exerting harmful influence over the legal industry in the UK. The Government should protect against litigation funding as a profit-driven business strategy and needs to put the right measures in place to return it to its core aim – providing access to justice for consumers.
The current delay in legislation is not a setback. It is an opportunity to build a better, more equitable legal framework around litigation funding.
Fair Civil Justice will continue to campaign to protect consumers’ and businesses’ interests in the UK and to promote a fair and effective legal environment.
Why a Delay to Legislation Was the Right Decision
Last week, I commented in both City A.M. and Law.com on the Government’s decision to delay the introduction of new legislation until after the Civil Justice Council’s (CJC) review is published, which is due next summer. At Fair Civil Justice, we welcome this decision and believe that it is a prudent move on the part of the Government.
The decision to delay any potential new legislation will allow all interested stakeholders an opportunity to engage further on the key questions that form part of the CJC’s consultation.
Profit over principle
The LFA (Enforceability) Bill, which was introduced earlier this year by the previous Justice Minister but ultimately dropped following the General Election, was flawed in a number of areas, and needed further time and consideration before coming in to law. One of my biggest concerns about the Bill was that it left the Third Party Litigation Funding (TPLF) sector practically untouched.
At its essence, litigation funding prioritises profit over the claimants’ best interests. Funders provide financial backing for cases in exchange for a portion of the winnings, creating a system where pursuit of profit overshadows the pursuit of justice.
This situation has meant that the unregulated TPLF sector in the UK is currently booming, with over 70 litigation funders currently active, of which the top 15 have seen their balance sheet assets soar from £6m in 2010 to £2.2bn in 2022.
The rapid growth of the unregulated litigation funding sector fuels the rise of group actions, which puts an enormous burden on British businesses. Group actions are no longer a merited last resort, but instead are actively pursued as a money-making strategy. In many cases this diverts consumers away from more effective and appropriate alternative dispute resolution mechanisms, and towards litigation, which is a drain on resources. Funds that otherwise would have been used to grow and innovate businesses and create jobs are lost on fighting litigation.
Why the delay in legislation is good news
Rushing complex legislation leads to unintended consequences, such as undoing safeguards for consumers and undermining the legal system. As Lord Ponsonby stated, and I agree, there needs to be “adequate safeguards to protect claimants from unfair terms.”
By engaging with stakeholders across sectors, such as consumer groups, corporates, academics, law firms and more, the CJC review will present a well-rounded perspective on litigation funding, inclusive of all voices. This review will encapsulate the broad range of issues, such as frivolous litigation, the influence of profit-driven funders on legal strategies and the unfair impact on the justice system. The speedy implementation of the LFA (Enforceability) Bill would not have taken into consideration such a broad range of views.
A new opportunity
Fair Civil Justice campaigns for more transparency in and stricter regulations on litigation funders to ensure that they are not exerting harmful influence over the legal industry in the UK. The Government should protect against litigation funding as a profit-driven business strategy and needs to put the right measures in place to return it to its core aim – providing access to justice for consumers.
The current delay in legislation is not a setback. It is an opportunity to build a better, more equitable legal framework around litigation funding.
Fair Civil Justice will continue to campaign to protect consumers’ and businesses’ interests in the UK and to promote a fair and effective legal environment.
Seema Kennedy OBE, Executive Director, Fair Civil Justice
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