The Justice not Profit campaign believes that the Government’s failure to introduce proper safeguards with regard to “class actions” and the lack of regulation for third party litigation funders will lead to profits being prioritised over justice.
The failure to implement these safeguards will lead to:
- 1. A compromised UK legal system
- 2. Consumer exploitation
- 3. Increased costs for business
- 4. Unchecked third party litigation funders
UK legal system compromised
The UK legal system is a model for the world. Changes to the legal system without adequate safeguards will lead to an increasingly litigious society and compensation culture.
Government’s expansion of mechanisms to start legal claims and its “hands-off” approach to the growing third party litigation funding sector are moving the UK closer to the U.S. model of civil justice. Legal procedures that encourage litigation and create an expectation of getting something for nothing have already had a detrimental impact on U.S. society and will similarly undermine the UK legal system. Furthermore, a public opinion survey revealed that 55% of those surveyed in England and Wales see the increasingly Americanised civil litigation system negatively.
Sharks are already circling the UK legal system. The rise of “no-win, no-fee” cases and cold calling around compensation for personal injury and PPI is the thin end of the wedge. The introduction of class actions (particularly the “opt-out” kind) is a serious concern. Similarly, the rise of third party litigation funding, particularly with the lack of safeguards necessary to prevent abuse, damages our legal system and will end up harming consumers and businesses. A market analysis on the third party litigation funding industry in the UK revealed a 743% growth of assets under management by litigation funders in the UK since 2009.
* Third Party Litigation Funding in the United Kingdom: A Market Analysis, September 17, 2015.
Consumers are exploited
In other jurisdictions class action lawyers and third party litigation funders, who are mainly concerned about their profits, target consumers. The UK has seen the beginnings of this same culture in recent years with “no-win, no-fee” personal injury lawyers and claims management organisations seeking to hijack and mass market their services (as happened with Payment Protection Insurance – PPI). U.S. consumers feel that the lawyers often benefit more than the victims they represent.
With “opt-out” class actions, consumers may be enrolled into lawsuits without their knowledge or consent. As such, consumers can have little control over a case which they have been signed up to. Consumers who are party to these claims often benefit very little from these cases. In the U.S., 60% of consumers surveyed acknowledged that they have been included in a class action lawsuit, while only 14% reported receiving anything of meaningful value as a result.
Increased costs for business
If runaway litigation is left unchecked, businesses will see innovation curbed and jobs lost, leading to a negative impact on the economy as their resources are spent defending against an increasing number of lawsuits. Even if a business is not targeted, its costs will increase through higher insurance premiums, driven by the risk of litigation. Based on the patterns seen in other jurisdictions, before long this can lead to small business owners being driven to shut their doors due to prolonged and unjust litigation and spiraling premiums.
It is not sufficient to allow plaintiffs’ lawyers, litigation funders, and other for profit parties funders to start whatever claims they find potentially profitable and then rely on courts to sort the good claims from the bad. Few cases make it to trial, as businesses feel compelled to settle to avoid the huge legal and reputational costs, and the inherent risks of litigation, even if the claim has little merit.UK consumers are reluctant to follow the U.S. model when told that lawsuits cost small businesses billions of dollars each year.
Unchecked third party litigation funders
The lack of regulation of third party litigation funders means that the justice system is vulnerable to unscrupulous funders establishing themselves and “gaming” the justice system for their own ends. A public opinion survey conducted in England and Wales revealed that 63% think the increase of third party litigation funding is a bad thing.
The rise in TPLF fosters a society where consumer harm is viewed by funders solely as an opportunity for profit. This could lead to litigation being brought in the UK (potentially on behalf of large numbers of individuals who are unaware of the case in their name) solely for the purposes of extracting settlements from companies who do not wish to be dragged into litigation (even if the claims have little or no merit). It could also lead to cases being directed by funders who may pursue cases for their own benefit rather than the benefit of the consumers on whose behalf the claims are nominally brought. In other jurisdictions there are many examples of funders “taking over” such cases, extracting significant rewards for themselves, and leaving consumers with little or nothing. In a public opinion survey conducted by BritainThinks in England and Wales, 84% of participants called for regulation of the third party litigation industry and shared their thoughts on preferred methods of regulation.