Legal experts warn Michael Gove about “U.S.-style abuses” threatening the English civil justice system

15th Jul 2015

Thirteen of the country’s leading legal academics and commentators have called on Michael Gove, the Justice Secretary, to “defend the integrity of the English civil justice system” from U.S.-style law suit abuses and unregulated funders.

The letter marks the launch of Justice not Profit (JnP), a campaign against litigation abuse and the increasing Americanisation of the English civil justice system.
The respected experts are concerned about the recent introduction of U.S. style “opt-out” collective litigation by Vince Cable, the former Business Secretary in the Coalition Government, through the 2015 Consumer Rights Act.

Without adequate safeguards the new “opt-out” collective litigation system in the UK creates a commercial opportunity for “unregulated and predatory” hedge funds and other investment firms with a specialized interest in litigation finance – also known as third party litigation funding. Ever since the 2008 financial crash, use of third party litigation funding, which is not regulated by the Financial Conduct Authority, has significantly grown.

In the 2009 Review of Civil Litigation Costs, Lord Justice Jackson concluded that “if the use of third party funding expands, then full statutory regulation may well be required.”

Research by the Justice not Profit campaign – shortly to be published – has shown there has been considerable growth of both assets under management and the number of individual litigation funds themselves in the last 5 years. Experts and activists are saying that the moment for regulation and increased transparency has now come.

The signatories of the letter, published in The Guardian, argue that the recent changes to the English legal system and the growth of litigation funding “pose a serious threat to the effective administration of justice.”

The group of academics include Dr. James Griffin, a Senior Lecturer at Exeter University’s Law School, who said: “Without the introduction of safeguards for funders, I believe we are at risk of creating a justice system that encourages abusive and frivolous lawsuits. I call on Michael Gove to introduce statutory transparency requirements for litigation funders.”

Professor Richard Grimes, Director of Clinical Programmes at the University of York’s Law School, who is also a qualified barrister and solicitor, said: “Consumers should get fair compensation. The question is if that will happen when there are no caps on funders’ fees.”

 

The text of the letter is as follows:-

 

“Sir or Madam –

The English civil justice system has been a model throughout the world.

However, we are concerned that recent changes – such as the introduction of U.S.-style class action lawsuits – coupled with unregulated and predatory third party litigation funding, pose a serious threat to the effective administration of justice.

Whilst well-intended, we believe recent Government reforms could lead to a proliferation of meritless lawsuits and have an adverse impact on the UK economy as it strives to compete globally. Between 2008 and 2011, UK litigation costs rose by a staggering 47%. In 2011, liability cost equated to 1.05% of the UK’s GDP.

We call on the Secretary of State for Justice and the Ministry of Justice to defend the integrity of the English civil justice system by introducing further safeguards, such as restricting the use of collective actions to opt-in classes and imposing other limitations that will avoid U.S.-style abuses. New measures – including statutory licensing for third party litigation funders and disclosure rules to enhance transparency – should also be introduced to prevent financial speculators from manipulating the civil justice system for profit.”

 

1. Dr Ruth Cain, Lecturer in Law, Kent University
2. Ms Kamala Dawar, Lecturer in Commercial Law, University of Sussex
3. Dr Catriona Drew, Lecturer in International Law School of Oriental and African Studies, Univer-sity of London
4. Professor Malgosia Fitzmaurice, Professor (Treaties), Queen Mary University
5. Dr James Griffin, Senior Lecturer, University of Exeter
6. Professor Richard Grimes, Director of Clinical Programmes, York University
7. Dr Andres Guadamuz, Senior Lecturer in Intellectual Property law, University of Sussex
8. Mr John Lloyd, Lecturer, University of Exeter
9. Dr Sonia Morano-Foadi, Reader in European Law, Oxford Brookes University
10. Mr Adam Sales, Research Assistant, University of Bristol
11. Dr Sujitha Subramanian, Research Fellow in Bristol Law School, Lecturer in Law, University of Bristol
12. Professor Sophia Tang, Professor of Law & Commerce, Newcastle University
13. Mr Victor Tunkel, Teaching Associate, Queen Mary University