The Civil Justice Council (CJC) has released its interim report on litigation funding, addressing key issues like third-party funder regulation and the collapse of SSB Law.
The working group, co-chaired by Dr John Sorabji and Mr Justice Simon Picken, was tasked by Conservative Lord Chancellor Alex Chalk to explore diverse topics ranging from third-party funding regulation to the potential of before-the-event (BTE) legal expenses insurance in litigation funding.
Currently, the report does not offer concrete conclusions or express the group’s definitive stance. However, it reveals apprehensions regarding the sufficiency of the Association of Litigation Funders’ (ALF) code of conduct, funders’ claims on damages, and the role of BTE legal insurance.
Specifically, the report probes whether the existing ALF’s code of conduct, which includes a £500 misconduct penalty, effectively deters breaches. It also questions the lack of provisions for compensating funders’ losses to prevent further litigation.
Highlighting the difference in standards, the review notes that some international associations, like the International Litigation Funders Association (ILFA), impose stricter conflict of interest rules and demand more transparency in funding agreements.
The report underscores the necessity of professionals advising funded parties to strictly adhere to ethical standards, ensuring clients understand various funding options and their implications. Meanwhile, recent government policy aims to minimise regulation unless viable alternatives are available.
On the issue of funding costs, the report reflects on societal expectations for legal cost control through regulated standards, contrasting this with the often-prohibitive finance costs in litigation. This contrast is particularly stark when finance costs far surpass litigation expenses, reiterating the call for potential reassessment after the Jackson reforms.
The working party is soliciting views on Canada’s suggestion to promote a mandatory, publicly administered legal expense insurance scheme as a civil legal aid replacement. By mandating the scheme, it aims to broaden accessibility and manage risk diversity, thereby lowering premiums. Nevertheless, considerations around premium payments for income-supported individuals remain crucial.
The interim report also seeks opinions on existing contingent funding agreements and the possibility of a unified regulatory framework governing all such funding models. The role and regulation of crowdfunding in legal contexts is another focal point.
The collapse of SSB Law, owing around £200 million to six funders, is examined in terms of portfolio funding and regulatory compliance by legal advisers. This incident, although possibly isolated, might unearth broader challenges or failures within the market or legal service regulation.
Sir Geoffrey Vos, chair of the CJC, acknowledged the report’s publication while noting the ongoing review of the Solicitors Act 1974. This overlapping review could ensure consistent and coherent outcomes as consultations proceed into the next year.
The interim report from the CJC opens a critical dialogue on the future of litigation funding, inviting varied perspectives to shape final recommendations. With the consultation phase set until 31 January, stakeholders have the opportunity to contribute to this evolving legal landscape before the final report is presented next summer.
