UK companies must avoid the worst excesses of US litigation culture,says Lisa Rickard of the US Chamber Institute for Legal Reform in reponse to Nick Rowles-Davies.
Writing for the Global Legal Post
, Nick Rowles-Davies, a solicitor with Vannin Capital, recently commented that third party litigation funding (TPLF) has been “burgeoning in the UK for at least the past three years.” Here at the US Chamber of Commerce Institute for Legal Reform (ILR) we couldn’t agree more. As of mid-2012, leading industry commentators calculated that £350 million of TPLF capital existed in the UK, available to finance both litigation and arbitration.
Estimates suggest this figure has increased significantly since then. Chris Bogart, Chief Executive of Burford, the world’s largest litigation funder, declared at the beginning of the year that the global litigation funding industry was "nascent no longer": Put all the litigation funds together, and there is only about $1bn of capital raised so far, much of it already deployed. Compare that to annual corporate litigation spending - which runs into the tens of billions - and you can see there is plenty of room to grow.
ILR believes that businesses and individuals should always be entitled to reasonable redress where there is merit to their claims. Yet the problem with litigation funding is it presents the potential for significant abuses within the UK legal system. Litigation funding represents the first step towards the UK legal system adopting the worst excesses of the US litigation culture. Furthermore, if this surge in litigation continues, it will almost inevitably lead to higher costs for UK business and thus consumers, potentially harming business growth.
Mr Rowles-Davies argues that “the vast majority of reputable funders are not trawling the market looking for cases.” He further described widely held views that litigation funding has led to an increase in professional negligence claims as a “misconception”. However, he offers no evidence to the contrary.
Lack of transparency
As it stands there is a serious lack of transparency across the litigation funding sector. There are no legally-mandated disclosure requirements to consumers who may avail themselves of funding arrangements, nor requirements to inform the court or opposing parties about these arrangements, thus masking from them the identity of a critical party in interest. Equally, without adequate scrutiny, ethical concerns about the ability of funders to dictate the legal strategy of a case will continue to be unaddressed. Therefore Mr Rowles-Davies’ distinction between “reputable funders” and the rest of the market is not a distinction that can currently be made by litigants, since there is simply no way of telling the players apart within the industry.
Litigation is a last resort
ILR believes that litigation is generally an inefficient and expensive way to resolve disputes and should be used as an option of last resort. That is why we support the Government’s endorsement of voluntary alternative dispute resolution (ADR) schemes as an alternative. ADR schemes can provide for fair and effective resolution of disputes, and would avoid litigation, benefiting both businesses and the UK legal system. Until we have appropriate statutory regulation, litigation funding will drive an increase in litigation in the UK, not all of which will be meritorious. This risks significant harm to British businesses, and an environment in which litigation costs are increasing will discourage inward investment and cost the UK economy jobs.