Judge Dread: How Lawfare Undermines Business Confidence in the UK
At a time when the UK should be aiming to bolster business confidence, the rapid expansion of class action cases and third-party litigation funding is opening many businesses up to claims worth billions of pounds.
Set in motion by legal reforms introduced in 2015, this class action explosion has been supported by an expanding industry of third-party litigation funders (TPLF), who aim to profit from these potentially lucrative class action cases. The combination of class action expansion and the proliferation of TPLF creates a legal environment in which consumer protection cases benefit litigation funders and claimant law firms, rather than negatively affected consumers, undermining trust in the UK’s legal system for businesses and individuals alike.
In order to restore business confidence in the UK, and ensure continued trust in the UK’s legal system, Parliament should consider introducing measures to:
Regulate TPLF on a level-playing field, subjecting it to the same rules and regulations as other investment products;
Introduce greater transparency into TPLF-backed class action cases, including the introduction of a blanket requirement of transparency about third-party funding;
Ensure consistent application of money laundering regulations, in order to prevent TPLF being used as a backdoor for international financial fraud;
Ensure that the UK’s competition law is fit for purpose, by protecting businesses from class action cases while regulators are in the process of making decisions on questions of regulatory compliance;
Put the ball back in business’ court when they fall foul of regulators, introducing arbitration clauses as a feature of regulatory decisions wherein businesses might be expected to provide compensation. These clauses should provide details on how, to whom, and to what extent businesses could be expected to provide redress in the result of an adverse regulatory finding.
Taken together, these measures will create a fairer system of class action litigation, ensuring that businesses can have confidence in the UK as a legal and investment environment, while also guaranteeing that class action cases genuinely benefit legitimately aggrieved claimants.