A large majority of UK business leaders see litigation risk as a catalyst for improved corporate standards, according to new research.

A report by Portland Communications, published today, finds that 72% of business leaders believe litigation that alleges human rights violations in supply chains is justified, while 67% agree that an increase in group claims would lead to improvements in corporate behaviour.

Some 77% of the 540 business leaders polled believe directors have a duty to ensure a company’s climate risks are properly managed. In comparison, a slightly smaller proportion (72%) of the members of the public from the overall sample of 2,000 respondents took that view, although that represented a 10% increase from 2023.

Ned Beale, co-head of disputes at Hausfeld, said that the data indicated that business leaders “not only have a greater awareness than the public of this type of litigation but are more supportive than the public of it being used to enforce standards and drive change”.

He added: “That reflects a trend we have observed in securities, ESG and competition claims that institutional investors and large corporates are often on both sides of claims.”

Meanwhile, the public’s appetite to join class action claims remains high overall, with 65% of respondents indicating they would sign up for one. This also applies to employers: 61% would join a class action against an employer accused of breaking the law if they were affected.

However, an overwhelming majority of respondents believe class actions mainly benefit law firms and litigation funders. Many respondents were also unaware they were eligible for compensation, although public awareness of class actions has increased, with 24% of people reporting a high understanding – up 5% from 2023.

While many people believe they are entitled to compensation, most are unaware of their eligibility to claim for it. For example, only 22% recognised their right to compensation in the Competition Appeal Tribunal, despite a rise in claims before the tribunal.

Leonia Chesterfield, a partner at Gateley’s class actions arm Austen Hays, said people might not realise they are already part of several class actions, as in opt-out claims “class members are automatically included unless they take positive steps to opt-out”.

The public is also increasingly comfortable with funders backing litigation and with litigation funders taking increasingly more significant shares of damages as compensation – even though 80% of the public believe that class actions mostly make money for law firms and litigation funders above all else.

Austen Hays partner Alicia Theuma said: “We are certainly seeing increased interest and engagement from the public around class actions, particularly opt-in actions.”

She cited the impact of the Post Office Scandal, which was only exposed after a successful litigation funding-backed group claim.

Notably, people’s belief that all compensation should go to those affected has dropped by 20% and double the number of people in 2024 reported a belief that “10 times their investment” would be a fair return to a successful litigation funder.

Kenny Henderson, a disputes partner at CMS, said the increase in public awareness was unsurprising, given the steep increase in class action litigation.

However, he added: “The main policy argument favouring class actions is to improve access to justice. This research shows that the public is very sceptical about this rationale, with over 80% believing that the main beneficiaries of class actions are law firms and litigation funders.”

Commenting on the findings, Simon Pugh, Portland’s head of disputes, said: “The data shows some really big shifts, for example, a 10-percentage point increase in the belief that directors have a duty to ensure a company’s climate risks are properly managed. We may be starting to see a paradigm shift in how the public views litigation in the context of ESG issues.”

Businesses “must also be alive to the public’s mood on these issues”, Pugh warned, adding: “Companies involved in litigation will find the risk to their reputation presents more challenges than just uncomfortable headlines. The risks of consumers signing up to mass claims, boycotts, employees leaving or investors moving capital are very real, according to our data.” 

RPC disputes partner Jonathan Cary, a co-chair of London International Disputes Week, concluded: “The data provides valuable insights into public and business leaders’ perceptions of corporate risk, class actions and litigation funding, all prominent topics at our main conference in 2024 and the panels throughout the week. This year’s polling shows that interest in these issues has, if anything, increased.”