Over the last 12 months, litigation funding has seen rapid growth; especially in the UK. It has now become a major topic of interest to litigators and clients in the business world, as a viable means to going to court.
Originating Down Under in Australia, the concept has travelled across borders and continents to attract interest in the marketplace.
This arrival of newly available capital should be encouraging for British businesses.
The activity has come under scrutiny from Parliament with the Legal Aid, Sentencing and Punishment of Offenders Act (LASPO). For now, litigation funders operating in English jurisdictions are self-regulated with the formation of the Association for Litigation Funders (ALF). This is despite attempts abroad by the Institute for Legal Reform, to implement formal statutory regulation.
What is going on right now?
Unfortunately, there has been a rise in the number of companies masquerading in the market as legitimate funders and they are having a negative impact. They are wasting clients’ time, and they are a potential professional danger to lawyers.
A remedy is the introduction of the ALF. At present, funders are regulated by issuing a new Code of Conduct which needs to be abided. It has terms that need to be complied with, and to join the funder must prove they have the money to fund cases.
It is not set in stone the effect of Damage-Based Agreements (DBAs) will have on the market, as this will come into place later this year. This is a very new funding option and fundamentally, it allows a business to pay the solicitor a portion of the damages, if the case is won.
It has been suggested though that clients will understand and accept the ruling of sharing their damages however; this will result in funding becoming more widespread as lawyers will reduce their risks and take partial funding.
No matter what is going on, one thing is for sure- the use of funding in the UK continues to grow.
What’s the difference between the UK market and overseas?
There has been an uptake of litigation funding in America but it has been slower than the UK and Australia, which is the market leader. This is for the simple reason that the concept is viewed with much more caution than it is in Australia or the UK. Concerns lie mostly with the consumer, following a history of expensive loans to Plaintiffs payable out of award money. What is more, there has been unease in commercial cases about the potential abuse and the control funders may use.
Having said this, there has been more interest as of late due to worldwide cash flow restraints given difficult economic times. Further countries getting involved include;
- South Africa
- Hong Kong
So as you can see, it is not just the UK that is taking advantage of the invaluable tool that is litigation funding. It is taking place on a worldwide stage. Whilst it isn’t suitable for every business, it should definitely be considered as a necessity to reduce risk and financial exposure.
This article was written by Lauren Grice on behalf of Vannin Capital, the specialists in litigation funding. Find out more by visiting the site today and speaking to the experts.