After a huge push from the third-party funding industry to introduce a new law on litigation funding, the Prime Minister’s decision to call a snap election has put the process in limbo – so what does this mean?
Litigation funding, when a third party provides financial funding for a legal case, has been in the headlines for the past year ever since the Supreme Court handed down a ruling in the so-called PACCAR case.
This class action involved several truck haulier companies in England that were sued for allegedly breaching competition law. PACCAR was one of those sued, and as it was the first name on the claim – it took the credit.
What happened in the PACCAR case?
Last year, the Supreme Court ruled in the PACCAR case that the litigation funds backing the claims against the truck companies did not have the correct financial arrangements to support the court’s actions properly. This decision threw the litigation funding industry into a state of uncertainty.
The sector battled on in the background until it caught a break with the Post Office scandal taking the country by storm. Founder of the Justice for sub-postmasters Alliance, Alan Bates, took the issue of litigation funding to the centre stage as he highlighted litigation funding as the “essential financing tool” in his case against the Post Office.
This resulted in the Justice Secretary Alex Chalk vowing to reverse the PACCAR Supreme Court ruling – with the help of a lot of lobbying from the funding sector.
The funding sector’s hard work was redeemed on 19 March when the Litigation Funding Agreements Bill was introduced to the House of Lords for its first reading.
Back to square one for litigation funding?
The Bill was set to move towards its report stage early next month; however, it will now be delayed due to the upcoming snap election.
Martyn Day, co-president of the Collective Redress Lawyers Association highlighted that the decision by the Government to drop the Bill “is disappointing news”.
Mohsin Patel, co-founder and director at Factor Risk Management noted that many in the industry were hoping the Bill would be dealt with in the “wash-up” period. He added that the news of the snap election “has thrown these plans into disarray.”
“A Bill cannot be carried over from one Parliament to the next,” Julian Chamberlayne, a partner at Stewarts stated. He pondered “whether it can be introduced in the same form, and whether it will be in the Lords or House of Commons, will depend on who forms the next Government.”
Day stated that “a lot of time has been spent pressing for the Bill” which would have provided certainty to the funders. This “certainty is now lost for at least some months while the political future of the country is decided,” he added.
However, as the Bill had cross-party support, the industry remains hopeful that it will jump back on the agenda once a new government is established.
Patrick Moloney, CEO of Litigation Capital Management, stated that the existing Conservative Government moved quickly to advance the Bill.
He noted as there is a ‘access to justice’ hook on the Bill, “if there is a change of government one might have thought a Labour led government would be equally focused on access to justice thus allowing the passing of the Bill.”
Patel noted: “Given the non-partisan nature of the Bill, and the groundswell in public opinion in support of the funding industry following the Post Office scandal, it seems unlikely that a potential Labour government will alter the course of the Bill.”
But timing is essential for this. A spokesperson for the International Legal Finance Association stated: “It is critical the next Government recognises the urgency of this issue and prioritises a quick fix to ensure access to justice can continue and the UK’s reputation as a world-leading legal centre is protected.”