The Competition Appeal Tribunal’s (CAT) approval of a £200m settlement in the landmark collective action against Mastercard has sparked a fierce public row.

The clash pits class representative Walter Merricks, his legal team at Willkie Farr and litigation funder Innsworth against each other – a popcorn moment for City lawyers, whether you be a claimant or a defendant in outlook.

While the tribunal’s decision represents a significant milestone in UK collective redress, it has also revealed deep tensions in the relationships between class representatives, their lawyers and funders.

At the heart of the controversy is the stark contrast between the original claim, valued at up to £16.7bn, and the final settlement sum.

Merricks defended the outcome as a major achievement, saying: “Recovering £200m… is a huge sum, and that will translate into a meaningful impact in the pockets of UK consumers,” calling it “a fair and just outcome for UK consumers”. 

He also highlighted the broader legal significance of the case, which included a landmark Supreme Court ruling and other precedents that would serve as “a deterrent to companies from acting unlawfully”.

The bullish tone struck by Merricks was not shared by Innsworth, which had funded the litigation for seven years at a cost exceeding £45m. Managing director Ian Garrard described the result as “very disappointing”, noting that the settlement represented “under 1.2% of the claim, as revised in late 2022”.

He accused Merricks and his solicitor, Boris Bronfentrinker, partner and chair of the European competition and antitrust litigation practice at Willkie Farr, of abandoning the case’s core – the alleged overcharges on UK domestic transactions, which accounted for over 90% of the claim’s value. 

“It is a full capitulation [in] the majority of the case,” Garrard said.

Merricks, in turn, accused Innsworth of using “strong-arm tactics” and initiating legal action against him personally, which he said could have led to his bankruptcy. He called on the Association of Litigation Funders to review Innsworth’s conduct and hoped the funder would “apologise and withdraw its claim against me, which has no merit and should never have been brought”.

Bronfentrinker was scathing in his assessment on LinkedIn of Innsworth’s role, stating that “their response to the judgment demonstrates what happens when greed turns into sour grapes”.

He added that Innsworth’s objections were “entirely misconceived” and that their conduct “throughout was deplorable”.

Despite the acrimony, Bronfentrinker maintained that the case had delivered tangible benefits: “Today’s judgment should get up to £70 into the pockets of UK consumers, a sum that will make a real difference to working people up and down the UK.”

The CAT’s judgment attempted to balance compensating class members and rewarding the funder. As Julian Stait, partner and head of the London litigation and arbitration team at Milbank, noted, the tribunal adopted a “demand-led” approach to distribution, allowing claimants to recover between £45 and £70, significantly more than a pro-rata division would have yielded.

The CAT also approved what it described as a return of 1.5x on Innsworth’s investment, calculated as its estimated costs of £45.6m plus an additional £22.8m.

Innsworth contended this was technically a 0.5x return on its costs and was, in any event, insufficient given the risks it assumed. Other funders this title spoke to agreed.

“No litigation funder would fund a claim of this magnitude with the prospect of making a profit of 0.5x after nine years on an unsecured basis,” said Jeremy Marshall, chief investment officer at Winward Finance.

The tribunal’s decision not to treat the litigation funding agreement as wholly determinative of Innsworth’s entitlement has raised concerns, with Garrard warning that the judgment “may have far-reaching implications”, arguing that it “will do nothing to encourage investors to fund other opt-out collective actions in the future”.

Despite the controversy, Merricks remained optimistic about the future of collective redress in the UK.

He reflected on his role: “It has been a privilege to end my career breaking new ground and leading the way in ensuring that the class action regime introduced in the Consumer Rights Act 2015 can be shown to work effectively.” 

As chair of the Class Representatives Network, he pledged to continue supporting others navigating the complexities of such litigation.

Ultimately, the Mastercard saga underscores both the promise and perils of the UK’s nascent collective action regime.

While the case delivered a significant payout and set important legal precedents, it also revealed the fragile alliances underpinning such litigation. 

Whether the CAT’s judgment will encourage or deter future claims remains to be seen, but it has undoubtedly reshaped the litigation landscape. 

The Civil Justice Council’s review – looking into how third-party litigation funding and collective actions should be regulated – cannot come too soon.