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Legal Services Board publishes research into litigation funding and access to justice

The Legal Services Board (LSB) has published research into litigation funding and its potential to improve access to justice. The research also considers issues related to consumer protection and regulation.

Led by Professor Rachael Mulheron KC (Hon), Professor of Tort Law and Civil Justice at Queen Mary University of London, the report’s findings include that in England and Wales:

  • Litigation funding provides a means to access justice for some individuals, SMEs and corporations who would otherwise be unable or unwilling to self-fund legal costs. However, funders carefully choose a minority of cases (only 3 – 5% of potential cases), and hence, without reforms in the sector, litigation funding cannot be scaled up to offer a mainstream route to access justice.
  • While litigation funding offers claimants ‘their day in court,’ once costs and the funder’s return are taken, the ultimate compensation may sometimes be too small to address the detriment a claimant has suffered, especially where rectification costs are involved. On the other hand, where used, litigation funding frequently facilitiates litigation that otherwise would not be possible to fund via other means.
  • Litigation funding has often been used in cases involving issues affecting a significant proportion of the population. These cases are often about broader consumer interests, and their results may influence consumer markets, as well as the development and enforcement of the rule of law.

Between 2019 and 2024, there were 44 cases involving litigation funding. Notably, many of these involved collective actions, including high-profile cases such as the ‘diesel-gate’ vehicle emissions case and the successful claim by 550 sub-postmasters against the Post Office for loss and damages they suffered in the Horizon IT scandal. Many litigation funding cases have also been used to challenge alleged anti-competitive behaviour, including train fares, mobile phone and landline contract costs.

The report also found that:

  • If the Litigation Funding Agreements (Enforceability) Bill 2024 reverses the impact of the UK Supreme Court decision in Paccar, litigation funding will likely continue to be a niche but very important feature of legal services provision.
  • The Association of Litigation Funders (ALF) provides a system of voluntary self-regulation via the Code of Conduct, including capital adequacy requirements and sanctions for non-compliance. For some law firms, the track record of the funder is more important than whether or not they are a member of ALF.
  • There may be a risk of litigation funding being used for economic crime where it is difficult for law firms to know the ultimate source of funds used by their litigation funder. Although the research found that law firms and litigation funding brokers took anti-money-laundering and know-your-client checks very seriously.

Richard Orpin, interim CEO of the Legal Services Board, said:

‘One of the many reasons some people cannot pursue justice when they have a legal issue is the cost of bringing a claim. Litigation funding can support people in accessing justice – it can enable David to take on Goliath. However, even when claimants win, because of the costs involved, their final financial settlement may not fully address the detriment.

‘There can also be tension between litigation funders who seek to make a financial return and claimants pursuing justice. Financers may try to avoid long, costly ongoing cases that tie up their investment, while claimants want to take a case as far as they possibly can. The Association of Litigation Funders’ Code of Conduct provides a pathway through these tensions.

‘This comprehensive study makes clear that litigation funding is a niche market that supports a small fraction of cases, and while it makes an important contribution, it alone cannot address the significant access to justice gap. These insights will inform our work exploring the role that legal services regulation may play in enhancing access to justice, and will also be of interest to policy makers elsewhere. We have shared the findings with the Civil Justice Council to consider as evidence as part of its review of litigation funding.’

 

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