The Civil Justice Council (CJC) looks set to back ‘light-touch’ regulation of the fast-emerging market for third-party dispute funding, in a move that could further usher the model into the mainstream of UK litigation.
Senior lawyers are expecting the CJC to recommend avoiding tough regulation of the sector after a ‘summit’ meeting last week with senior lawyers and funding professionals to canvass views on the issue.
A number of those who attended the meeting on 8 February - including senior litigators, regulators, funders and brokers - have indicated that a consensus is emerging for greater transparency in the funding market rather than prescriptive regulation.
The CJC initiative, which is being overseen by chief executive Robert Musgrave, is the first stage in drawing up recommendations for the Ministry of Justice on the fast-growing third-party funding market, including assessing the case for amending the Civil Procedure Rules.
Businesses that have entered the market include funders IM Litigation Funding, Allianz, hedge fund MKM Longboat and Juridica Investments - which publicly listed for £78.4m last year - as well as a number of brokers such as Calunius Capital, GALS and Maxima Costs Chambers.
Early consensus at the meeting has seen support for a number of measures to boost transparency in the sector, including toughening requirements for solicitors to inform clients of funding methods in addition to information already provided on after-the-event insurance policies.
Another proposal includes changing the current rules on security of costs applications to make it possible to require third-party funders to put in money at the start of a dispute to cover adverse costs. The Law Society has already indicated broad support for the light-touch stance.
Russell Wallman, the Law Society’s director of government relations, told Legal Week: “An encouraging degree of consensus has emerged about the need to avoid the unnecessary regulation of third-party funders, while ensuring claimants are fully advised. There is also broad agreement about the need to protect potential opponents from being unable to recover their costs.”
The CJC committee, which hosted the discussions, is now expected to report back to the CJC with a consultation likely to be issued before the end of the year.
The initiative comes as a separate report from the CJC - a Government-backed advisory body - has recommended more support for group action litigation in the UK, a model that is often linked to third-party funding. SJ Berwin partner Hilton Mervis (pictured) commented: “Light-touch regulation and the introduction of greater transparency seems a good idea. If funders would have to have in place measures to show they could pay the other side’s costs when requested it would cut out rogue funders.”
However, Linklaters’ head of advocacy, Mark Humphries, was less upbeat, saying: “This is the bare minimum that could be introduced and it is surprising that regulation should be so light-touch in risky litigation that could not have necessarily commenced without funding.”