Perhaps nothing demonstrates the growing importance of litigation funding than the fact that government regulators are beginning to pay attention to it. In the United Kingdom, litigation funding has been largely regulated by private and voluntary efforts. But legislators are beginning to consider whether regulation is necessary.
In the United Kingdom, as in the United States, litigation finance is growing. According to publicly available data, the sixteen largest third-party funders in the UK now have over £1.5 billion under management. This represents an increase of 743% from £180 million in 2009. But those are just the public figures. It is likely that much more than that amount is invested in litigation finance.
Currently, the UK government does not regulate litigation finance. And, as of last year, the government had no plans to put regulatory legislation forward. The government has, however, said that it is ready to investigate what kind of legislation might be warranted if substantial changes occur in the litigation funding marketplace.
In the absence of legislation, the regulation of litigation funding in England and Wales is voluntary. The primary source of this voluntary regulation is a membership organization: the Association of Litigation Funders (ALF). ALF has established a voluntary code of conduct for its members, which was first published in November 2011. It was developed by a working group from the Ministry of Justice.
Under the code, funders many not attempt to influence the litigation, and they must agree to pay all debts when they become “due and payable.” They must also ensure that they have enough capital to cover all the arrangements on their books for a minimum period of 36 months. In addition, the code prevents funders from terminating a funding agreement “without good reason.” Funders must also assure that, before the funding agreement is signed, the party receiving funding must receive “independent advice” on the terms of the funding agreement. ALF members which fail to meet the requirements of the code may be subject to a fine of up to £500 and/or termination of their membership.
Keywords: litigation finance, legal reform, third-party funding, law reform, regulation of litigation funding
Works Cited: Ben Wells, Regulation of Third Party Litigation Funding in England and Wales, Out-Law (July 19, 2018) available at https://www.out-law.com/en/articles/2018/july/third-party-litigation-funding-england-wales/