Will the litigation funding sector be regulated?

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Litigation funding has been in place in the UK for a long time, but there is ambiguity over whether this forms an industry. Regardless, the bigger question is whether it is time for litigation financing to be regulated by the courts.

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Is litigation funding monitored?

While litigation funding must follow a set of rules and is expected to be transparent in any agreements formed, as established by the Association of Litigation Funders, it has largely been free of an official governing body. The ALF was created while litigation funding was still fairly small to create a code of conduct for financers to follow and as an effort to self-regulate; however, the industry is yet to be regulated by the high court.

The guidelines that litigation finance specialists such as https://www.novo-modo.co.uk/litigation-funding must follow include capital adequacy, termination and approval of settlements and control.

Is mandatory regulation on the cards?

The matter of mandatory regulation is currently being investigated by the CJC, with a full review of the sector set to be published this summer. It is thought that change is on the horizon, particularly because of how in-demand litigation funding is becoming and the subsequent need to protect all parties involved.

What are the benefits of regulating litigation financing?

As litigation funding gets bigger and more popular, the purpose of the now antiquated code of conduct is being questioned. ALF’s code has come under fire a few times due to issues arising by complying with the code; for example, some of the key clauses are flawed, as they can be open to interpretation. This is not good enough in the eyes of the law.

Does everyone agree regulation is the best way to go?

Many are in favour of remaining self-regulated and support the ALF’s code of conduct. The role of litigation financiers is very important, as funders help many sectors to achieve justice; and nobody wants these opportunities to be taken away from innocent individuals. It is feared that tightening up the rules could very well restrict funders and funding.