Government set to commission review of third-party litigation funding


Offord: Officials looking at how to return to pre-PACCAR position

The Ministry of Justice is set to commission the Civil Justice Council (CJC) to consider whether third-party litigation funding needs to be regulated, it emerged this week.

It came amid wrangling about whether the scope of the Digital Markets, Competition and Consumer Bill is wide enough to allow the PACCAR ruling to be rolled back in its entirety and not just in relation to litigation funding agreements for opt-out collective proceedings in the Competition Appeal Tribunal (CAT).

In PACCAR, an opt-out case, the Supreme Court decided that third-party litigation funding agreements taking a percentage of the damages were caught by the Damages-Based Agreement Regulations 2013 – most do not comply with them.

A government amendment to the bill looks to tackle the impact of the ruling on opt-out collective proceedings in the CAT only, with ministers saying the bill was not the appropriate vehicle to address all claims affected by the decision.

The issue was debated this week during the bill’s committee stage in the House of Lords and Conservative peer Lord Hodgson, a businessman who has called for the regulation of litigation funding for several years, put down an amendment for a review of the industry in relation to competition and consumer cases.

Referencing his comments during a House of Lords debate on the issue back in 2017, he said he remained concerned about the amount of damages funders took, their control over cases and claimants’ exposure to costs, and noted how much the industry had grown since then.

“Another important development is the emergence of sovereign wealth funds in funding class actions,” he continued.

“These might well be undertaken for commercial not monetary gain. Consider if a sovereign wealth fund – say a Chinese sovereign wealth fund – engineered a class action against a UK high-tech company: it might be seeking not financial reward but to impede the company’s developments, to upset its reputation or, if it is lucky, as the proceedings go on, to get access to some of the technology within the company.

“Some requirement to consider who stands behind the funding of all these actions might be useful.”

He withdrew the amendment after business minister Lord Offord assured him that the government was “already considering options for a wider review of the litigation funding market and its regulation”.

The minister said: “The Civil Justice Council may be asked to undertake such a review, given the need to ensure access to justice and the attractiveness of the jurisdiction. Given its independence, it may be unhelpful to specify the scope and timing of such a review at this stage.

“However, I expect colleagues from the justice department to update this House once that review is agreed.”

Meanwhile, Lord Sandhurst, who practises as Guy Mansfield KC, laid amendments to improve on the government’s, which he described as “inadequate: it does nothing like enough to overturn the damage which has been done”.

The PACCAR decision meant “that the Horizon sub-postmasters would not have obtained funding: it would have been unlawful”, he pointed out.

His amendments sought to “restore legitimacy in the CAT to funding arrangements in opt-in proceedings and two-party actions”, and for consumer and competition cases outside the CAT – a limit imposed “because my much wider original amendment was ruled out of scope”.

He added that he backed Lord Hodgson’s amendment but said “there is not much to regulate at the moment. We have to go further down the road and start with getting funding arrangements back on track. Regulation can follow swiftly”.

Former Lord Chief Justice Lord Thomas said he agreed with Lord Sandhurst that the Supreme Court had got PACCAR wrong and stressed the importance of correcting it beyond CAT cases.

“I do not think an awful lot of people really appreciate that the Horizon scandal, and the miscarriage of justice that occurred, would never have been uncovered if there had not been litigation funding to support Mr Bates and others when they brought their complicated action against a very wealthy body,” he said.

Lord Thomas said he was looking to invoke a rare House of Lords procedure to ask the House to consider the bill’s scope.

“It simply cannot be right, because Magna Carta says we should give justice to all people, to say, ‘We will provide access to justice to those who fall within the definition of consumer or who can bring their claims before the CAT, but the rest of you, no’.”

For Labour, Lord Bassam echoed the concern that the bill would create a two-tier system, “whereby claimants would have different rights and different access to financial backing, and therefore different legal support, depending on the court in which they pursued their claims”.

He supported Lord Thomas’s bid to look at the scope of the bill. “Since the ‘Mr Bates vs The Post Office’ drama, government ministers have suddenly woken up to the salience of the issue. There is surely enough goodwill in the political system for colleagues to agree a way forward on this.”

Lord Offord stressed that it was “government policy to return to the pre-PACCAR position at the earliest legislative opportunity”.

He continued: “I assure noble Lords that we and our colleagues in the Ministry of Justice are examining this matter urgently and considering the best possible way to achieve this objective.”

Lord Sandhurst withdrew his amendments but warned that “something will have to be delivered by the time we get to [the report stage], or it will be a very interesting day out in the main chamber”.




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