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‘Rogue entrants’ moving into litigation funding

Leading academic claims CMC-style scenario could prompt state regulation

12 December 2013

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Dr Angus Nurse, an academic from Middlesex University who co-authored a report on litigation funding in 2012, has warned that "rogue entrants" are starting to move into the market.

"I'm not necessarily saying that the companies involved are inherently criminal," Dr Nurse said. "But they have developed a model different to models used elsewhere which take a hands-off approach.

"The larger funders do not take responsibility for running a case. We identified a funder which was advertising exactly that.

"You don't regulate for people who follow the rules but for people who don't follow the rules."

Dr Nurse, who co-authored Litigation Funding: Status and Issues, said most claims management companies followed the rules, but some did not, so they needed state regulation.

Speaking at the Westminster Legal Policy Forum this morning, he said: "There is potential for rogue entrants and we have started to see this in the litigation funding market.

"I would prefer not to name individual companies, but there is evidence and we alluded to one case in the report."

Mike Napier, former senior partner of Irwin Mitchell and chairman of Harbour Litigation Funding, said "rogue entrants" was a "really strong phrase" and it would be interesting to see the evidence.

In response, Dr Nurse promised to attach evidence to a written version of his speech.

Earlier in his talk, Dr Nurse said there was opposition to litigation funding in other jurisdictions, but some of the concerns did not exist here because of the nature of the product.

"It's not about participation in litigation as much as investment in it," he said. "Investment is made on the basis of understanding the strategy and having confidence in legal teams.

"There are concerns that if the funder is an active participant, it will influence legal decisions, but this is primarily not the case.

"A lot of analysis is going on, but a lot of cases are not being funded because they do not meet the market threshold. The threshold where cases are funded is much higher in reality than £100,000. Cases worth more than £1m are the norm."

- In a separate development, Leslie Perrin, chairman of both Calunius Capital and the Association of Litigation Funders, attacked the role of Russian oligarchs "flashing the cash" in inflating litigation fees.

"When oligarchs decide to use London as a playground, it's a disaster for the market," Perrin told the forum this morning. "Silks won't get up in the morning for less than £950 per hour.

"What the funders want to see is economically rational behaviour by commercially responsible clients.

"We've only funded one divorce case and it was not economically rational. Quite why funders want to do it, I really don't know.

"We are now talking to very, very large corporations which want to hedge the risk of litigation and take away the pain and shock. Every serious funder is engaged with larger corporations on this issue.

"Jackson took away our toys as a funder, though insolvency practitioners somehow managed to salvage recovery from the wreckage of 1 April 2013. English litigation is now extremely risky.

"The whole adverse costs regime is a penal procedure when you compare it to arbitration or litigation in other jurisdictions.

"We're not afraid of regulation. We embrace it as a badge of honour. State regulation is way down the track."

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