There is currently no need to introduce statutory regulation of third-party litigation funders, the government said yesterday.
Justice spokesman Lord Keen said there was no reason to move away from the voluntary scheme.
Conservative peer Lord Hodgson of Astley Abbotts asked in a written parliamentary question whether the government planned “to introduce regulations to ensure that third-party litigation funders are subject to the same statutory duties and obligations as apply to law firms operating in the same field”.
Lord Keen replied: “The government does not believe that the case has been made out for moving away from voluntary regulation, as agreed by Parliament during the passage of the Legal Aid, Sentencing and Punishment of Offenders Act 2012.
“The market for third-party litigation funding (TPLF) remains at a relatively early stage in its development in this jurisdiction and we are not aware of specific concerns about the activities of litigation funders.
“The government has not therefore undertaken a formal assessment of the effectiveness of the voluntary code of conduct or the membership of the Association of Litigation Funders. The last government gave Parliament an assurance that it will keep third-party litigation funding under review and this government is ready to investigate matters further should the need arise.”
Writing on the Conservative Home website last summer, Lord Hodgson said it was “astonishing” that the funding industry – with “billions of pounds of assets under management worldwide”, and London “one of the international funding hubs for these investors” – was not regulated like other financial services.
He quoted at length a report by the US Chamber of Commerce’s institute for legal reform that identified various problems with TPLF.
The chamber has been in the UK for several years, actively lobbying against funding and calling for statutory regulation, including during the passage of LASPO.
Lord Hodgson’s article concluded: “There is a strong argument for a full parliamentary review of the extent of TPLF. This also could usefully consider potential safeguards, including transparency requirements, registration of funders and prohibition on funder control of proceedings.”
Steven Friel, chief executive of Woodsford Litigation Funding, said: “It is unsurprising that the government has no concerns about the activities of litigation funders.
“I recently carried out a survey of the law and practice of litigation funding in 16 international jurisdictions, including England and Wales. I asked legal and industry experts in each of those jurisdictions about disputes or other problems relating to litigation funding, and the feedback was that there are few, if any, problems. If it ain’t broke, don’t fix it.”
On the same day as his question to the Ministry of Justice, Lord Hodgson asked the Department for Business, Energy and Industrial Strategy whether it had “undertaken any consultation with consumer groups about whether consumers involved in the recent Mastercard court case were adequately protected by the provision of the Consumer Rights Act 2015”.
This case, using the new opt-out class action regime – which is also strongly criticised by the chamber – is backed by third-party funding.
In response, minister Lord Prior noted that the £14bn case filed against Mastercard at the Competition Appeal Tribunal in September 2016 was still in its early stages.
“It would be premature to undertake a consultation on the Act’s impact at present. The government is required to carry out a full review, consulting a wide variety of stakeholders, including consumer groups, once the Act has been in force for five years.”