By Jonathan Smyth, Senior Legal Recruitment Consultant
With the government set to commission a review into third-party litigation funding and the possibility of regulating this space, the future of how disputes are funded in the UK could face seismic change. The PACCAR decision of July 2023 effectively ruled that many existing LFAs are, in essence, unenforceable.
Legalfutures.co.uk noted that the issue had been debated in the House of Lords earlier this month, Conservative peer Lord Hodgson noting his concern about the amount of damages funders took, their control over cases and claimants’ exposure to costs, and noted how much the industry had grown since then.
“Another important development is the emergence of sovereign wealth funds in funding class actions…these might well be undertaken for commercial not monetary gain. Consider if a sovereign wealth fund – say a Chinese sovereign wealth fund – engineered a class action against a UK high-tech company: it might be seeking not financial reward but to impede the company’s developments, to upset its reputation or, if it is lucky, as the proceedings go on, to get access to some of the technology within the company.”
The debate is particularly relevant given the recent publicity given to the Post Office Horizon scandal and the significant positive impact that third-party litigation funding had on behalf of the affected postmasters, referenced by Nadim Zahawi in his recent City A.M. article, arguing that the possibility of over-regulation of this area risks making this course of action “unavailable to other unfairly maligned groups who may need to seek justice in the future.”
In practice, this review could not only mean a significant change to future funding arrangements, but also the need to review and possibly renegotiate existing agreements. Nicola Henshall at NRF notes that “in many cases, the funded party will need further investment to continue the proceedings, and it will be in both the provider and the recipients’ interests to find a workable solution. However, reopening negotiations may have detrimental consequences for one side or the other.”
Legislation is expected to be forthcoming to provide greater clarity on the future of third-party litigation funding, however, with no set timeline for this, funders and parties face an uncertain period as to whether or not any judgement awarded may be possibly affected by any potentially retroactive statute.
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Need help with your legal recruitment or to find your next role? Contact Jonathan Smyth on jonathansmyth@srmrecruitment.com or 07957 986390.