This latest iteration of New Labour likes to emit the vibe that regulation is for wimps. ‘The regulatory system has become burdensome to the point of choking off innovation, investment and growth,’ chancellor Rachel Reeves grumbled in one of her many broadsides on the subject. ‘We will free businesses from that stranglehold.’
It is through this lens that one should peruse the Civil Justice Council’s review of litigation funding. Stakeholders are lining up to demand formal superintendence of the sector, most likely by the Financial Conduct Authority. ‘Effective regulation can only be achieved… if the funders are regulated by financial services regulators alongside legal services regulators, managing the risks of potential litigants.’
So says the Legal Services Board, which speaks for many.
That would certainly be logical. In 2009, Sir Rupert Jackson’s costs review recommended self-regulation, with the proviso that statutory oversight should be revisited if and when the market expanded. A tipping point was reached long since. In the decade to 2022, the value of UK TPF assets grew tenfold.
Logic and political calculation make uneasy bedfellows, however. In addition to the chancellor’s queasiness over throttling UK plc, there is the continental context to consider. It is well over two years since the European Parliament endorsed an updated version of the landmark Voss report, which met with a mixed response. There is still no formal plan for EU-wide regulation of lit funding.
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More likely is the ‘light-touch’ approach predicted by Andrew Lenon KC, who sits as a chairman of the Competition Appeal Tribunal. It seems ‘unlikely at this stage that the CJC will recommend particularly prescriptive regulation of funding’, Lenon told a class action symposium last November. He was echoing a European Law Institute report from October that pointed to the importance of funding in securing access to justice; a report welcomed by the European Commission.
That would certainly be favoured by a beleaguered industry. But what would ‘light-touch’ look like? Bolstering the Association of Litigation Funders is an option that would need serious work. Only 17 funders are members and the association’s ‘sanctions’ are footling.
A maximum £500 fine is no deterrent to anything, much. Such a sum would just about cover a decent client dinner in the Square Mile.
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