How Has The Third-Party Litigation Funding Market Embraced The Code of Conduct?

The self-regulation of the UK third-party funding market has recently entered into a debate with the US. The Institute for Legal Reform (ILR), an American body, has insisted on statutory regulation and made 11 claims against litigation funding in England.

They claim that litigation funding in this country opens the flood gates to consumers making claims, despite the fact that it is not for personal injury claims and is only used by commercial companies and individuals with large scale commercial claims.

litigation funding dispute
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The Civil Justice Council working party have created the Code of Conduct and it is being embraced by litigation funders in the UK. The Association of Litigation Funders has been set up to monitor compliance and is an important step in the growing market.

The move has been welcomed by Lord Justice Jackson, as meeting the requirements in his report for a self-regulatory regime. Now, Lord Thomas, a Liberal Democrat peer, has withdrawn his amendment for statutory regulation.

What is the Code?

Published by the Civil Justice Council, it features strict capital adequacy requirements to ensure that funders have the resources available to cover a case for at least 36 months. Now, the funder has no right to terminate an agreement without good reason, and it restricts their ability to control and govern the litigation.

So what is the issue then?

The ILR states that the Code doesn’t address all the risks and concerns raised by Lord Justice Jackson- despite him saying otherwise. It also argues that it fosters litigation abuse.

It seems that the ILR have a misunderstanding of how litigation funding works in the UK, and they have been ill-informed. They assert that it reduces the level of justice in the legal system when in fact it increases it, giving businesses the opportunity to take a case to court much more easily.

Litigation funders only invest in good cases with merit that they can make a return on investment- if they didn’t, they wouldn’t get very far. Poor cases without merit would simply result in them losing money, and go out of business.

What is the reason for the ILR’s opposition?

At first glance, why the ILR has even got involved and tried to interfere in the UK litigation funding market is a mystery. The body maintains that the practice carries substantial risks of lawsuit abuse however; an interesting insight into the membership of the ILR draws up some other conclusions.

The American Association for Justice (AAJ) published a report in October 2011 which suggests that ILR has the sole mission of restricting an individual’s ability, who has been harmed by negligent corporations, to access the civil justice system. It further stated that every member and company on the body’s board stands to gain financially, from the agenda of “blocking the courthouse doors.”

So how is the UK funding market performing?

Anyone that states funding encourages poor cases is simply scaremongering. The advantages it offers to businesses with regards to achieving justice as well as improve cash flow, far outweighs anything else.

The only risk it entails is that there are no guarantees of a successful outcome, and therefore you may incur some costs for expert or legal fees. Of course there is the possibility that if your case loses, you may need to pay your opponent’s legal bill too, but litigation funding removes this risk.

About the Author: This article was written by Lauren Grice on behalf of Vannin Capital, the experts in third party funding. Visit today for financial help running a case.