Tom Borman, LawFuel contributing editor
The London legal services sector is facing significant challenges due to the government’s failure to address a crucial Supreme Court ruling on litigation funding agreements. Lawyer are warning that this inaction is negatively impacting business in the City, according to a Times report.
The issue has come to thefore following the recent settlement of a class action against Mastercard, a case that alleged that Mastercard’s fees to merchants resulted in higher prices for consumers over a 16-year period. The settlement was miserable, amounting to as little as £4 to each of the 46 million potential claimants.
Settlement Dispute: The settlement, reached after nine years of litigation, is now being challenged by Innsworth Advisors, the London-based litigation funding company backing the claim. They argue that the settlement amount is “too low and premature”.
Criticism and Defense: Critics argue that the small payout to consumers provides little incentive to claim, while lawyers stand to receive substantial fees. However, Walter Merricks, who brought the claim, defends the settlement, stating that it aligns with the purpose of the collective action regime to address cases where individual consumer losses are small.
The Paccar Ruling
At the heart of the issue is a Supreme Court judgment known as Paccar, which ruled that certain litigation funding agreements were unlawful and unenforceable.
Despite promises from the previous government to address this ruling, no legislation has been enacted, creating uncertainty in the litigation funding market, which is reportedly preventing claims from proceeding, potentially harming law firms and limiting access to justice for potential claimants.
Consequences for Lawyers
Legal and financial experts warn of serious consequences for London’s position as a global legal center including reduced funding activity in the UK and a shift of dispute resolution work to other centres like Paris, Singapore, and New York.
All of which is bad news for the legal sector in London and lawyers and others are calling for urgent action to remove the negative effect of the Pccar ruling to provide greater clarity for the funding market.
- They argue that failure to do so will continue to damage London’s legal services sector and potentially limit access to justice for individuals and small businesses in various types of claims.
The Ministry of Justice have acknowledged the important role of third party litigation funding while also noting the need for regulation and safeguards for claimants.
In the meantime, the Paccar judgment has thrown a spanner in London’s litigation funding works and lawyers will be anxiously awaiting developments to ensure that London remains a viable and successful forum for major class actions and dispute resolution.
