A growing number of law firms in the UK are following their US peers by working closely with litigation funders and betting on the outcome of cases in return for a share of the winnings, according to a report in the Financial Times.
Litigation funders back the cost of a lawsuit in return for a share of the winnings. The sector has expanded in the UK as investors have sought higher returns in an era of ultra-low interest rates. According to law firm RPC, Britain’s litigation funders had £2bn in assets in April — double the amount three years previously.
While litigation funders claim they have no control over the suits, Former Irish Law Society president Geraldine Clarke said managing a three-way relationship could be “challenging.” “If it’s true that he who pays the piper calls the tune then where does it leave the client? The relationship between the client, the funder, and the lawyer needs to be finely balanced,” she said.
At the start of this month, the Financial Times Editorial Board released an opinion piece on the need for oversight for the litigation funding industry in the UK. According to the editorial, the lack of regulation in the industry may lead to conflicts of interest as law firms set up joint ventures with funders.
