Smith:
All third-party funders should join the Association of Litigation Funders while the government decides on the way forward for the sector, the courts minister said this week.
Sarah Sackman declined to put a timescale on the Ministry of Justice’s response to the recommendations of the Civil Justice Council (CJC) review of litigation funding, which was published in June [1] and called for urgent legislation to overturn the Supreme Court’s 2023 ruling in PACCAR.
It also laid out how “light-touch” regulation could be applied to the sector.
The debate in Parliament on the CJC report was organised by Conservative MP Sir Julian Smith, who said: “There may be merit in applying some elements of the CJC report through regulations, but it is worth considering strengthening the current self-regulation regime, including by getting all players operating in the UK market to join the Association of Litigation Funders.
“It is a self-regulation body has a code of practice, but not all litigation funders are in it. I call on the industry to get everybody operating in litigation funding in the UK on board in the association.”
In her response, Ms Sackman echoed “the invitation… to those who are not currently subject to the code’s ethical and operational standards to seize the opportunity to bring themselves within what is currently a voluntary regime”.
In his contribution, Labour MP Oliver Ryan highlighted the role of funding for cavity wall insulation claims in the rise and fall of SSB Law.
“Ordinary families were left exposed, with no resource and no protection. That failure should shame us all. We can do better by having effective regulation of the market. The Solicitors Regulation Authority and others still have questions to answer about SSB.
“More than 70 litigation funders are active in the UK, managing billions of pounds but operating with very little formal oversight. That gap leaves consumers exposed and confidence in our legal system weakened.”
Ms Sackman said she recognised the importance of funding to access to justice as well as its “huge economic contribution”.
“Along with the quality and calibre of our judiciary and legal services, third-party funding is an important factor in attracting international business to England and Wales as a jurisdiction of choice…
“There is a concern and very real risk that funders are beginning to pivot away from London, England and Wales to look at other jurisdictions, such as New York, Paris and Singapore, more favourably. In short, that is not good for UK plc.”
The minister said the government was “taking the time” to consider the report “very carefully”.
She added: “We are aware that many are eagerly awaiting the government’s response, and I look forward to announcing our way forward in due course. The stakes are high: access to justice, consumer protection and economic growth. We have to get this right.”
Ms Sackman added that it was “highly unlikely” that any legislation to reverse PACCAR would have retrospective effect.
Sir Julian advised the government to “be alive to the risk of fettering an innovative and successful industry that enables consumers to mount challenges against Goliath-sized firms”.
Mr Ryan urged ministers to back the CJC recommendations for “greater transparency and oversight”, clearer limits on funding controls, and court scrutiny of the profits and sources of funding, among others.
“Those steps would restore fairness and integrity to collective actions and make sure that outcomes serve the people involved in these cases and not the profit motive.”