Litigation heat ups as access to third party funders becomes easier
As third party funding of litigation becomes more acceptable around the world one of its knock-on effects has been a sharp increase in cases brought against some of the UK’s biggest companies. Litigation funder Bentham who coordinated a class suit against Tesco in 2015 said that was just the first of many, according to their ambitions.
Following the financial crash in 2008, 179 out of 279 cases involved FTSE100 banks and in 75% of them they were the defendant, according to Thomson Reuters data. The risk to UK companies is not only the claim that “the increasing number of litigation funders [is] helping fund cases that might not otherwise have been pursued” but that as business is increasingly being conducted globally, it opens them up to numerous and varied jurisdictions making them legally vulnerable.
That said, the banks appear to be more than happy to go head to head with claimants, rather than settle early, unconcerned by damage to reputation or shareholder opinion; could this battle-hardened approach be a hangover from all the scandal borne during the financial crash?
The litigation financing industry has been growing in the UK and US for over a decade, further boosted by reforms introduced in 2013. According to RPC, a City firm, litigation funders committed £723m to legal claims in the UK in 2016, up from £575m the year before. Some of the world’s key legal centres such as France, Dubai, Singapore and Hong Kong have in fact welcomed the third-party funding regime.
In spite of a number of risks associated with the system such as the high cost of funding, recovery of costs against funders (in English law), confidentiality and privilege and potentially improper influence over proceedings, its popularity and uptake doesn’t seem to be abating or even putting off the big corps from jumping into the ring.