Third-party funders tell US lobbyists to focus on their own problems back home

Perrin: statutory regulation doesn’t necessarily bring right answers

American lobbyists against third-party funding were yesterday told that they would be better off trying to reform their own system than creating “a fuss” in a market where participants are “trying to do this right”.

However, the current system of voluntary regulation of funders came under attack for its code of conduct, lack of reassurance for consumers and being part of a “toxic cocktail” that could sent litigation in England and Wales down the road of that in the US.

Leslie Perrin, chairman of the Association of Litigation Funders and chairman of Calunius Capital, told a Westminster Legal Policy Forum seminar on third-party funding that statutory regulation of funders, as pressed for by the US Chamber of Commerce, “doesn’t necessarily bring the right answers”.

He pointed to the statutory regulation of damages-based agreements, which does not make provision like the code of conduct for issues such as termination and dealing with conflicts.

Addressing the Institute for Legal Reform (ILR) – part of the US Chamber of Commerce and sponsor of the event – he added: “Surely your organisation would be better served if you redouble your tort reforms efforts in the US… That would be a better dividend than creating all this fuss about an industry that is trying to do this right.”

Later, closing the conference, Professor Rachael Mulheron, a member of the Civil Justice Council who sat on the working party which drafted the self-regulatory regime, said that the code is “working well and fit for the purpose” it was intended. She emphasised that judicial oversight is a key part of the funding regime in England and Wales.

The ILR’s Mary Terzino argued that with US Chamber of Commerce members employing a million people in the UK, and litigation funding being a global industry, it had a legitimate interest in what is happening in England and Wales.

While the voluntary code “addresses some of the potential problems” with funding, Ms Terzino highlighted a range of concerns about it, including: that the independent advice on the funding agreement can be paid for by the funder; that it makes no provision for disclosure of the existence of the agreement to the court and opposing party; and that there are no effective sanctions for breach.

She argued that as the market grows, less reputable players will come in. “Legitimate players should have nothing to fear from statutory regulation,” she said.

From the floor, Susan Dunn of Harbour Litigation Funding argued that the risk of adverse costs represents a major difference from the US system, and said the security for costs procedure means any defendant lawyer worth their salt will find out how a claimant is funded.

But Ms Terzion’s call for statutory regulation was supported by Nigel Muers-Raby, chairman of the Consumer Justice Alliance, who said that if third-party funding is going to start supporting consumer cases after Jackson, “then they need more reassurance that they won’t be left high and dry”.

Ken Daly, a partner in the Brussels office of US firm Sidley Austin, claimed that unregulated third-party funding is part of the “toxic cocktail” of factors that could make US-style “litigation abuse” more prevalent in the UK – the argument made during the seminar that the courts can stop abuse was used in the US and manifestly failed.

Arguing that statutory regulation is needed to stop frivolous litigation, he said: “If a profit can be turned on a meritless case, it is economically rational to pursue it.”




30 March 2021

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