PRIVATISED FUNDING: BOUNTY HUNTERS AGAIN? CFAs, contingency fees, - - PowerPoint PPT Presentation

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Aug 01, 2023 382 likes •640 views

PRIVATISED FUNDING: BOUNTY HUNTERS AGAIN? CFAs, contingency fees, and third party funders in civil litigation Christopher Hodges Head of the CMS Research Programme on Civil Justice Systems Centre for Socio-Legal Studies, University of Oxford

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PRIVATISED FUNDING: BOUNTY HUNTERS AGAIN? CFAs, contingency fees, and third party funders in civil litigation Christopher Hodges

Head of the CMS Research Programme on Civil Justice Systems Centre for Socio-Legal Studies, University of Oxford Erasmus Professor of the Fundamentals of Private Law Erasmus University, Rotterdam Life Member, Wolfson College, Oxford Solicitor

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A Timeline of Litigation Funding in England & Wales

Personal assets
Trade Union
First Party Insurance: BTE LEI
Legal Aid, 1949-1995-2011
CFA + ATE LEI: Conditional fee arrangement +

after-the-event insurance, 1995-2011

DBA: Damages-Based Agreement: 2011
TPF: Third Party Litigation Funding: 2000s

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Sources of Funding

Personal
Third Party
Cooperative
Trade Union
Bank
Insurer
State
Investor
Intermediary
Lawyer
Investor/Handler

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The Legal Aid Welfare State Experiment

Decisions on

– Eligibility – Volume of supply

Rights-based: control by suppliers co-payment Attempts to control: approved suppliers, budgets, fixed fees Protectionism: one-way cost shifting

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CFAs

Basic fee + success fee (linked to risk)
Costs risk: ATE (expensive)
1999 Woolf CPR: system favoured wealthy C
all 3 elements recoverable from D
Costs War
Claims Management Companies and abuse
2007 Regulation

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Jackson Costs Review 2010

Costs still too high: multiple measures (QOCS)
CFA success fee and ATE premium should not be

recoverable: come out of damages

MGN v UK ECHR
Further cut in Legal Aid
Funding has to go private:

– BTE (but needs fixed costs) – Lawyers: DBAs or CFAs – Third Parties – SLAS/CLAF

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DBAs

Contingency fees are banned in most of

Europe

Political objections to ‘American contingency

fees’: allegations of abuse

DBAs – not ‘contentious business’ so

developed in tribunals, esp employment

2010 regulation: fee<35% recovery

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Growth of Third Party Funding

Germany
USA
Australia
Canada
UK
Other

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Common law doctrines Maintenance: officious intermeddling in a suit, by maintaining or assisting a party with money Champerty: supporting a suit, financially or

therwise

Barratry: stirring up a suit

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Evolving attitudes

Criminal Law Act 1967 abolished the crimes

and torts of maintenance and champerty

Still an illegal contract + risk of a costs order
CFAs made a statutory exception 1995

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Germany

Predictable costs: tariff for court, lawyer and

recoverability

Hence growth of (BTE) LEI insurance
Spread to companies (SMEs)
No rule on maintenance and champerty:

contingency fees banned, success fees permitted

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Private law enforcement in the US legal system: Encourage all to pursue breaches of public and private law

Wide investigation powers
No cost barriers
Cost incentives
Deterrent penalties

Private attorneys general – bounty hunters Blackmail settlements?

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USA

Loans to the poor:

– consumer protection and abuse issues

Loans to law firms
Growth of investors:

– large commercial claims

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Australia

Class actions regime – representative P
TPF: Fostif 2006 ‘access to justice’
A managed investment scheme subject to

regulation? Brookfield Multiplex 2009 but ..

Assignment model: cover costs risk

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EU LFs

Origins

– International ECGD debt collection – Insolvency

German insurers
Netherlands:
UK: several
CDC: chemical cartel damages
CFI: Ireland, airline cartels

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Models

Assignment
Full funding, separate legal team
Variable funding, funder active
Brokerage
Lawyer funding

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State of the market

Large commercial claims>£100,000
Some claims by SMEs
No effect on access to justice for individuals
Little current interest in aggregated claims
UK Self-regulatory code 2011

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Another Wild Card Alternative Business Structures 2012

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Benefits of LF

Saving to public funds
Access to justice for SMEs
Pressure for efficiency in dispute resolution

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Issues with LF

Transparency
Acceptable commercial activities

– Claims Handlers Regulation – Scale of remuneration

Financial prudence and reliability
Acceptable behaviour within the legal process

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Maintaining the integrity of the legal process Inequality of arms Improper pressure These issues arise whoever funds

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Policy Issues

1. What is the national policy on enforcement of law through private litigation? 2. Is funding by either or both of third parties and lawyers needed for certain types of case? 3. Do certain situations give rise to conflicts of interest that cannot be satisfactorily controlled? 4. If the level of conflict should be controlled, how?

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Who controls the tactical decisions?

Investigation and assessment of facts and

merits

Selecting legal team
Instructing lawyer, controlling conduct
Deciding on settlement

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Potential for conflicts

Simplest model is separation of functions: client

controls, lawyer advises, funder funds

Conflict where

– Inexpert client: lawyer/funder influence – Lawyer advises and funds – Funder ousts client

How much potential for abuse?