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Study suggests third party litigation funding ‘does nothing’ for ordinary consumers

1 June 2010

The first academic study on whether third party litigation could give people with limited means greater access to the justice system has revealed its initial findings. The research team from Oxford and Lincoln universities says preliminary findings show that although litigation funding has increased access to justice for companies, individuals do not benefit from the funding models currently available.

The research team is looking at the emergence of third party litigation funding in Britain for civil cases. Litigation funders are companies capable of raising vast sums of money to allow claimants in civil litigation cases to pursue justice through the courts or arbitration. In return for their finance, the funders retain a share of any damages awarded.

Collaborating on the study are Dr Christopher Hodges from the University of Oxford, and Professor John Peysner and Dr Angus Nurse, from the University of Lincoln. The preliminary findings show that most of the claims levels currently involved in cases paid for by a litigation funder are relatively high, usually well in excess of £100,000. This suggests that ordinary consumers would be unlikely to use this model. The researchers’ view is that a new, different model of litigation funding needs to develop for the ordinary person in the street to benefit.

Dr Angus Nurse from the University of Lincoln said: ‘Much has been said about access to justice over the last decade. There is a principle in this country that everyone should have equal access to the courts but in reality that just is not the case. In reality, you have more chance of getting justice if you have money. In this research we are considering whether third party litigation funding can provide a solution to problems with access to justice in cases where people want to take legal action but cannot get legal aid and do not have the money to fund the case themselves.

’Principal investigator Dr Christopher Hodges, from the University of Oxford, said: ‘Our research shows that litigation funding currently benefits SME companies in accessing justice. This new form of funding has revealed an unknown area of demand for enforcement of civil law, which is of considerable potential benefit to the economy. Ensuring that small companies are able to claim when they are commercially disadvantaged, such as where contracts or licensing agreements are breached, is important for maintaining a healthy economy.’

The study also showed that litigation funders in Britain are primarily corporate entities working with large funds rather than smaller funders. The researchers found that concerns about litigation funding presenting possible risks for the consumer are currently of little concern since litigation funding is primarily a commercial product aimed at corporate clients. However, there is concern about the potential for unfair contract terms in future, if funding is made available to ordinary people who may have little understanding of their rights.

Although in British law it is illegal for a third party to interfere with or control another party’s litigation, it is not illegal for a third party to fund another’s litigation, provided they do not dictate legal strategy. Interviews conducted for the study with funders and consumer groups indicate that both groups would welcome more government regulation in this area. The funders would like to see regulation brought in that prevents rogue traders from entering the market place and they believe it might even help to make third party litigation more popular. Consumer groups interviewed said the current situation of self-regulation was inadequate.

The preliminary findings were unveiled at an international conference at the University of Oxford. The International Conference on Litigation Funding was organised by Oxford’s Centre for Socio-Legal Studies and the University of Lincoln’s Centre for Dispute Resolution.

For more information, contact the University of Oxford Press Office on 01865 280534 or press.office@admin.ox.ac.uk
Alternatively, contact the University of Lincoln Press Office on 01522 886042 or pressoffice@lincoln.ac.uk

Notes for Editors:

  • The research team conducted a review of existing literature and legislation and interviewed consumer groups, legal experts, civil servants and litigation funders to assess the role third party litigation funders could play in improving access to justice in Britain.
  • Third party litigation funding differs in important ways from no-win no-fee agreements, which are commonplace in Britain. In no-win no-fee cases, law firms act on a conditional fee arrangement (i.e. not as a third party) where the fee is waived until the outcome of the case. These are often straightforward cases with relatively low legal costs and damages. Third party litigation funders tend to seek out larger, more complex civil cases with potential for large sums of damages. They provide funding to cover the legal expenses in pursuing litigation, rather than handling the case.
  • University of Oxford’s Centre for Socio-Legal Studies is the country’s oldest centre for empirical legal research, comprising some 12 scholars in multiple disciplines. It’s most recent work on civil justice was a 36 country comparative study in 2009 that formed the basis for several of the recommendations in the Jackson Costs Review.
  • The University of Lincoln’s Centre for Dispute Resolution, Compensation and Risk has previously conducted research for the Government on consumer protection laws. Its recommendations were incorporated into a consultation on ‘civil sanctions’ published in March this year by the Department for Business, Innovation and Skills.