The Justice not Profit campaign opposes the Government’s introduction of U.S.-style “class action” lawsuits into the UK legal system. It also highlights the dangers of a growing and unregulated third party litigation funding industry. We believe the integrity of our legal system is now under serious threat.
The Justice not Profit campaign seeks to build a broad coalition of support to call on the Government to stop those who exploit the civil justice system for profit and to protect consumers and businesses alike.
The Justice not Profit campaign believes that some of the Government’s changes to the legal system pose a serious threat to consumers and businesses and undermines the effective administration of justice.
1. Class actions
We are concerned that U.S.-style class actions, including class actions with “opt-out” features, will increase the volume and coercive power of litigation, regardless of whether claims have any merit.
The UK already allows group litigation in different ways.
The recent introduction of “opt-out” litigation allows self-elected “representatives” to bring cases to court on behalf of everyone in the UK who may potentially have been harmed by a breach of competition law. For example, if you potentially suffered loss as a result of anti-competitive conduct, someone could bring a claim to court on your behalf (and on behalf of everyone in a similar position) without asking you, or even telling you.
Unless you choose to “opt-out” of the claim, your rights will be automatically determined in the case, even if you do not take part. You may not even be aware that the case is taking place on your behalf.
Moreover, the ability of someone to hold themselves out as representing a large group of consumers, many of whom may not know they are claimants in a lawsuit, can be used to force a settlement from the company that is accused of wrongdoing, even when it has a good defence. Businesses are often compelled to settle simply to avoid the expense and negative publicity of litigation (particularly mass litigation). Ultimately these settlements cost all consumers in higher prices as the increased cost of doing business is passed on.
Similar issues can arise with “opt-in” collective actions, but at least in these cases claimants must choose to take part. A system which allows self-interested law firms or investors in litigation to claim to represent everyone in the UK, makes the problems with the proposed “opt-out” system particularly severe.
2. Third party litigation funding
We are concerned that third party litigation funding (TPLF) is gradually converting the civil justice system into a means for profit-making third parties–who have no connection to claimants, and who are subject to no regulatory framework–to hijack disputes for their own ends.
TPLF is the practice where an outside party, with no direct interest in the claim, funds a lawsuit as an investment in exchange for a share of any payout from the claim.
Litigation funders are solely motivated by the potential profit in a lawsuit and not a just outcome for the claimant.
Many of these funders are investment vehicles operated by hedge funds or other financial services firms. If the claim is successful, they take a substantial percentage of the proceeds, often up to 40 percent.
Their goal is exclusively “return on investment,” not justice. Whether the claims they support are speculative “have a go” claims or entirely justified is relevant only to the calculation of likely returns. The system allows private equity and other investors to gamble on the outcome of litigation. What’s worse is that funders are not even obliged to tell the people being sued or the court that they are involved, and that they stand to gain a huge portion of any award. Judges making awards might not realise that only a fraction of the damages they award will actually go to the persons on whose behalf the claim is brought.
* McKnight, David L., and Paul J. Hinton. International Comparison of Litigation Costs; Canada, Europe, Japan and the United States. Washington, DC: June 2013.
** Hinton, Paul, David McKnight, and Lawrence Powell. Costs and Compensation of the U.S. Tort System. Washington, DC: October 2018.
We draw our support from a range of backgrounds and professions, from small businesses to academia. We passionately believe that the justice system should be protected from abuse and profiteering.
Who is behind Justice not Profit?
The campaign is backed by the U.S. Chamber Institute for Legal Reform, a not-for-profit public advocacy organisation affiliated with the U.S. Chamber of Commerce, the world’s largest business federation, which represents the interests of more than three million businesses of all sizes, sectors and regions, in addition to state and local chambers and industry associations. Many of the U.S. Chamber’s members are companies that conduct substantial business in the UK or are British-owned and operated. ILR is therefore deeply interested in the orderly administration of justice in the UK.
ILR’s mission is to restore balance and ensure justice for both claimants and defendants, and maintain integrity within the civil legal system. We do this by creating broad awareness of the impact of litigation on society and by championing common sense legal reforms at the state, federal and global levels. Since its founding in 1998, ILR has worked diligently to limit the incidence of litigation abuse and has participated actively in legal reform efforts in the United States, the European Union, the UK and elsewhere.
ILR is sharing its experiences of the worst aspects of the U.S. litigation culture with UK policymakers and other stakeholders to protect the integrity of the UK’s civil justice system.
For more information on the Chamber’s Institute for Legal Reform please visit www.instituteforlegalreform.com