A litigation funder with £40m a year to invest is considering using alternative business structures to make funds available to law firms, according to its chief executive. They have to be prepared to work under damages-based agreements (contingency fees), however.
Third-party litigation funders thinking of investing in law firms to avoid liability for adverse costs will have to try their luck in front of the court after an important report on contingency fees refused to make a recommendation on whether this should be possible.
Alternative business structures may well herald the demise of hourly billing as legal practice becomes even more competitive, the Master of the Rolls has predicted. Contingency fees and price comparision websites will also play a role.
Law firms and third-party funders will not be allowed to initiate group actions for breach of competition law – and such cases will be exempt from the move towards allowing solicitors to work on a contingency fee basis, under proposals published this week by the government.
The UK is on the cusp of a “litigation revolution” involving boutique alternative business structures offering externally-funded contingency fee deals, according to the chairman of the Solicitors Regulation Authority, speaking at yesterday’s Legal Futures conference.
An 11-man working party will meet for the first time today to advise on how to introduce contingency fees for court work in England and Wales. The working party has been set up by the Civil Justice Council.
Work is needed to determine whether solicitors who offer contingency fees could find themselves on the hook for a successful defendant’s costs, Lord Justice Jackson said last week. He said a working party might be needed to resolve outstanding issues.
The introduction of self-regulation for third-party litigation funding may not be sustainable in the long term, a team of leading academics has warned. They also highlighted the risks that contingency fees pose.
More information to help consumers select a solicitor, freedom to choose a lawyer under legal expenses insurance, and the regulation of contingency fees are all areas where the profession and the public should work together, a leading consumer champion claimed last week.