September 17, 2015

Third Party Litigation Funding Considered the Next Step Towards a Legal System that Prizes Profit Over Justice

Ben Shimshon, Founding Director, BritainThinks

The public is suspicious of third party litigation funding and support the regulation and supervision of this burgeoning industry. Whilst knowledge levels are currently very low, BritainThinks’ research, which includes a survey of 1,250 adults in England and Wales, suggests that as the public learns more, third party investors in English civil court cases will face deep public concern. Far from trusting third party investors to self-regulate, the public strongly supports mandatory independent oversight of the industry.

Adults in England and Wales aren’t deeply engaged with the civil litigation system – asked if it’s heading in the right or wrong direction, the largest group (41%) say they are unsure (38% say ‘wrong direction’ and 21% say ‘right’). When they do consider the subject, our focus groups revealed that it tends to be in the context of the perceived growth of a “compensation culture” – a belief that the justice system and society more broadly is becoming increasingly litigious: “It seems that everyone is claiming for the smallest thing, employers, businesses and even family and friends can be sued over the silliest things.”

While the public still have a lot of faith in the English justice system, they also feel concern about this “compensation culture” trajectory – something they sum up as a movement towards a “US-style” system. In particular, a number of behaviours are felt to be on the rise, that the public views in a negative light: 71% of adults in England and Wales say they see more advertising of legal services than they used to, and the same proportion say they hear more stories about people “trying their luck” to get compensation. 50% say they get more sales calls and texts from lawyers than they used to. In all these cases, more than 65% of adults say these developments are having a negative impact on the English legal system. Across the board, the perception of decline in the standing of the English legal system is more pronounced amongst older generations.

It is this perceived blurring of the lines between the administration of justice and the pursuit of personal gain and profit that informs the public’s negative responses when they learn about third party litigation funding. Offered a brief description of the industry, 63% feel negative about it, 29% strongly so. Only 14% felt any kind of positivity about third parties investing in legal cases. In the focus groups, this knee-jerk response was clearly driven by a concern that the third party funders would likely have little connection to the case in hand, and that their selection of cases to fund were unlikely to be driven by considerations around securing justice, and much more influenced by the likely size and scale of the settlement: “The cases that should go forward morally won’t be the ones that go ahead. They will pick on businesses with a weak defence.”

Looking at arguments in favour, the idea that, in the light of the reduction in Legal Aid budgets, third party funders will fund cases that might not otherwise be brought to court receives some low-level support (24% agree). However, this is the strongest argument in favour of third party litigation funding that we tested in the survey, and its power was wholly outstripped by agreement levels with the arguments against third party funding:

  • 61% agree that “these firms will only fund the cases that they think they can win, not the cases they think are just”
  • 59% agree that third party funders only exist “to make a profit, not to deliver justice”

In this context, the idea that third party litigation funding should be independently regulated is intuitive. 84% of adults in England and Wales agree that such regulation is “essential”. Qualitatively, there is real disbelief when members of the public discover that all that currently exists is a voluntary code of conduct. While most of the public stop short of advocating an outright ban (41% agree there should be a ban), there is significant support for independent regulation via a mandatory code of conduct with meaningful penalties (84%). Within this, the public supports a regime that would include government licensing of third party funders (77%), and a cap on the fees that funders can charge and the proportion of a given settlement that they can claim (81%).

To recap, the state of the civil litigation system is not top of the list of the public’s front-of-mind concerns, and knowledge of third party funding is close to non-existent. However, there is a prevailing set of perceptions and concerns about the trajectory of English justice more broadly into which TPLF slots very easily, and the industry will need to work hard to secure its license to operate amongst the English and Welsh public.*

* BritainThinks’ research was conducted in two phases. The first, in October 2014, comprised six focus groups across three locations with members of the public from a range of socioeconomic backgrounds. The second, in July-August 2015, comprised an online survey of 1,261 adults in England and Wales, with data weighted to be representative by gender, age, region and socioeonomic grade.

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