Litigation funding in the UK is typically self-regulated, which means no government body currently oversees or regulates it; however, change may be on the horizon, with regulation of the industry across the EU in consideration. Let’s look at what litigation funding is and whether it should be regulated.
What is litigation finance?
Litigation finance, or litigation funding, is where a third-party company offers financial solutions to individuals who need financial support to proceed with litigation. A commercial funder might offer solutions, to help a party to pay all or part of their legal costs throughout their case; after all, litigation is a very expensive process and even if you are successful in winning your case, an award of costs may not be guaranteed and may not cover the full cost of your litigation. A third-party finance company, such as //www.novo-modo.co.uk/litigation-funding, can offer tailored loans, financial support, and solutions to litigants.
How is litigation finance currently regulated?
At present, litigation finance is a self-regulated industry without official oversight; however, many large litigation funding companies are ALF members, which refers to the Association of Litigation Funders, meaning they must comply with a certain code of conduct and face sanctions if they fail to. Without formal oversight, however, there are questions as to how effective this might be in terms of protecting consumers and regulating the industry.
What could happen?
The European Parliament voted to commission the Voss Report, which makes recommendations on how litigation funders could be regulated moving forward. These recommendations outline methods by which the industry could be regulated, such as by setting standards including award caps, disclosure obligations, and potentially independent regulators.
Should regulation go ahead?
On one hand, regulation is important to ensure consumers are treated fairly and litigation funding organisations all meet the same standards and comply with important regulations. On the other hand, however, regulation could reduce litigation funding options, which are key for many litigants in need of financial support and crucially improve access to justice.
There are currently no signs that the UK will begin regulating the industry in the near future.