Litigation funding is increasingly an option which parties to
English litigation explore, even if they choose not to pursue it or
are unable to secure commercially acceptable funding terms.
We take a look at the recent developments in the industry,
potential obstacles and also key predictions.
The Court of Appeal's comments in the recent case of
Excalibur Ventures LLC v Texas Keystone Inc and others  EWHC
3436 have confirmed that litigation funding is here to stay as
"a feature of modern litigation" (see details of the case
in Joy McElroy's
article). It has also been suggested by commentators that
litigation funding is becoming more mainstream and, due to
increased awareness of it as an option, more in demand too.
The benefits of litigation funding as a strategic tool are
becoming more widely recognised. Securing litigation funding, where
disclosed to the other side, can demonstrate that a party has the
finances to fight a case. It may also encourage parties to reach a
commercial settlement earlier because more costly stages of
proceedings (such as disclosure or witness statements) will not
present the same opportunities to make settlement offers in
circumstances where costs are less of a pressure point for the
A more recent development is the increased availability of ad
hoc funding, for example, through crowdfunding platforms.
Traditionally, crowdfunding had been the domain of the
corporate/entrepreneur world to help raise funds. However, a couple
of market-leading platforms have emerged in the US and the UK
enabling people to raise funds to cover legal costs for cases as
varied as planning challenges, appealing fines, proposing law
reform and even participation in the current Brexit appeal on
Despite the steady growth in awareness and use of litigation
funding, there remain a number of issues which could affect the
future growth of the practice area:
The Excalibur case highlighted the risks of providing funding
after third-party funders were ordered to pay indemnity costs (more
of the other party's legal costs than is usually ordered) in
circumstances where they maintained that they were not responsible
for any of the factors that led to the indemnity costs being
ordered (see see details of the case in Joy McElroy's
The rise in crowdfunding as a solution to legal costs raises
questions around whether the platform or individual donors might be
ordered to pay a winning party's legal costs at the conclusion
of a case, following the standard loser-pays-the-costs rule.
A further issue which could stifle the growth of the litigation
funding industry is regulation: Currently, funders can
self-regulate through membership of the Association of Litigation
Funders (ALF) which sets down and enforces a code of conduct for
its members (of which there are currently seven). Legal issues
arising from crowdfunded litigation or further indemnity costs
awards could lead to requests for increased or compulsory
regulation for litigation funders. However, no regulatory changes
are anticipated at the moment.
A possible consequence of litigation funding becoming more
mainstream, with more players in the market, could be more
competitive pricing for parties seeking funding.
There are two main potential growth areas for funding:
After the Event (ATE) insurance, which can be used to insure
third party funders/investors against potential adverse costs
orders, such as that made in the Excalibur case.
Class actions: following the introduction of the Consumer
Rights Act 2015 (the Act), an "opt-out" procedure exists
where consumers within the defined class (i.e. those who are
affected) are automatically included. It has been suggested that
any increase in class actions as a result of the Act could provide
fertile ground for litigation funders due to significant investment
required in order to get such large claims off the ground.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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The English Commercial Court has published two recent judgments of Mr Justice Popplewell in a single anonymised case concerning the removal of two arbitrators under section 24(1)(d)(i) of the Arbitration Act 1996.
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