22 June 2012

The piper and the tune

Intricacies and details over litigation funding have historically been for the anorak crowd.

Intricacies and details over litigation funding have historically been for the anorak crowd. Analysing complicated fee and cost structures appeals to the same sort of character that has a penchant for spending weekends at the far end of windswept railway platforms, notebook in hand (although these days, it is likely to be a mobile electronic device), squinting at the fading numbers on ageing locomotives.
But the reality is that litigation funding goes straight to the heart of access to justice. Most countries – even those in the developed world – have poorly funded (at best) legal aid systems, and those that attempted to do better, such as the UK, have found in the current economic climate that ‘national legal service’ schemes are a luxury.
So if you can’t pay to have your day in court, well, you don’t get to have your day in court.

No win, no fee

There have been efforts to solve that dilemma, most notably the US’s contingency fee system, whereby lawyers work on a no-win, no-fee basis, bagging large chunks of a claimant’s damages if successful. Britain has a watered-down version in its conditional fee arrangements, which allow no-win, no-fee deals with a maximum 100 per cent uplift for success and a panoply of complicated before- and after-the-event insurance products to cover cost in the event of defeat.
Third-party litigation funding is the latest entrant to the field. As our commentator points out this week (see page 13), the phenomenon was born in Australia, is gaining speed in the UK, but is still struggling in the US, where contingency fees continue to reign supreme.
In principle, third-party funding involves injecting a dose of speculative capitalism into litigation. Investors back cases they feel have a strong chance of success and are rewarded with a slice of damages for their trouble if victorious at the end.
Simple enough. But the idea of involving parties in litigation that have no direct connection to the dispute leaves a bad taste with some. The old maxim of who pays the piper calls the tune is invoked, as ethical questions over who runs the litigation arise. Is it the party directly involved, or is it the party paying for the party?


Paying bills is also currently very much on the minds of French business lawyers. As another commentator points out this week, François Hollande’s convincing march to the Élysée Palace – and the subsequent victory of his Parti Socialiste in the recent parliamentary elections – has made many of their corporate clients slightly twitchy. Well, very twitchy, actually, as they anticipate steep corporate and personal tax rises, triggering fears that many will sneak off towards the sortie signs.
If nothing else, it’s quite a good time to be a tax law specialist in Europe. The warnings in France coincide with splash reports in Britain on efforts by the taxman in that country to clamp down on offshore so-called investment schemes that suddenly look like little more than thinly veiled evasion gambits. When the taxman cometh, the tax lawyer benefits.

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