The UK Ministry of Justice Finds No Need for Statutory Regulation of Litigation Funding

On January 25, 2017, the Ministry of Justice for the United Kingdom confirmed that it would not impose statutory regulations on third party litigation funders, opting instead to allow funders to continue functioning under the current voluntary scheme. This development follows a trend of other jurisdictions and courts similarly shying away from implementing further regulations on commercial litigation funders. 

The Ministry’s statement was prompted by a written inquiry from Lord Hodgson, a Conservative peer in the House of Lords, who questioned whether the government would “introduce regulations to ensure that third-party litigation funders are subject to the same statutory duties and obligations as apply to law firms operating in the same field.”

The Ministry responded that the “government does not believe that the case has been made out for moving away from voluntary regulation [for third-party litigation funding]...and we are not aware of specific concerns about the activities of litigation funders.”

Similar restraint has been taken by various courts and governments in the face of calls for increased regulation of litigation funders. For example, the United States District Court for the Northern District of California recently considered revising Civil Local Rule 3-15 to require the automatic disclosure at first appearance of all litigation funders involved in any proceeding.  Rejecting that proposal, the Court left Rule 3-15 as is, and instead revised the standing order for all judges to require disclosure of litigation funders in class actions only. See link. Similarly, even though a few states like Indiana and Vermont recently passed legislation regulating litigation funding, the regulations targeted consumer litigation funders only with an eye towards predatory consumer funding practices. See link.          

“Generally speaking, policymakers and courts throughout the world have recognized that the vast majority of commercial litigation funders are responsible actors who are improving the civil justice system, rather than harming it,” said John Harabedian, Legal Counsel for Bentham IMF. “As such, these decisionmakers are comfortable allowing commercial funders to operate without having to jump through any unnecessary regulatory hoops.”