Whilst the current collective action regime has been viewed as a net positive for law firms and litigation funders in the UK, there are outside observers who argue that the current system benefits these players more than the consumers and organizations represented in the legal actions.
An LFJ Conversation with Michael Kelley, Partner, Parker Poe
Whilst the current collective action regime has been viewed as a net positive for law firms and litigation funders in the UK, there are outside observers who argue that the current system benefits these players more than the consumers and organizations represented in the legal actions.
In a new article published in Conservative Home, the chief executive of Fair Civil Justice and former Member of Parliament (MP), Seema Kennedy, argues that the current collective actions regime has created an environment in which ‘law firms and litigation funders profit from consumers who have suffered harm.’ Kennedy argues that it is these two groups who have benefited most from the changes to collective actions following the Consumer Rights Act 2015, each seeking to maximize financial returns from these claims.
Kennedy highlights the example of the Horizon IT claim, which saw former postmasters awarded a £43 million judgement, only for a significant share of this award to cover the legal fees and funding costs. Kennedy suggests that if the current system is allowed to continue, it will lead to the UK’s businesses suffering from what she describes as: the United States’ ‘aggressive profit-driven litigation culture’.
To address the perceived imbalance in incentives, Kennedy recommends that the UK government consider mirroring other jurisdictions, such as the EU, which increases regulation around litigation funding. Kennedy argues that the current system of self-regulation under the Association of Litigation Funders (ALF) is ineffective, and that without stricter regulation, the interests of funders will be placed ahead of those of consumers seeking access to justice in the first place.
