I was interested to read Neil Rose’s recent blog, ‘Making the case to regulate third-party funding – badly’, and his analysis naturally seems to represent the majority of those in the funding industry. 

For those not familiar with the situation, the US Chamber of Commerce is very strongly opposed to third-party funding and recently launched an organisation called ‘Justice not Profit’ to champion formal regulation of the practice in the UK. Their recent report is worth a read, but of particular interest is the snappily titled infographic that they produced, ‘A Look Into the Perception of Civil Justice & Litigation Funding in England & Wales’. The infographic includes a wide array of mostly meaningless statistics (for example, 66 per cent of 1,261 members of the public believe the legal system has less integrity than it used to have) and four of the public’s biggest concerns about funding.

While I find it hard to believe that the public cares very much about funding, and the methodology of the survey is open to serious scrutiny, the four biggest concerns cited are worthy of examination:

1) These firms only fund the cases that they think they can win, not the cases they think are just.

I have no intention of indulging legal philosophy, but this statement strikes me as peculiar. If a case is just, one assumes that the claimant has a valid claim that will win. A just case and a case that can be won are, therefore, the same thing. While funders will not select all cases that are just, they will nevertheless fund some cases that are, providing a valuable boost to access to justice.

2) Third party litigation funders exist to make a profit, not to deliver justice.

This comment applies equally to every part of the commercial legal system – lawyers, barristers, experts and, indeed, funders all exist to make a profit. They also provide a valuable service that allows their clients to access justice. If one is critical of funders, who only make money on success, how does this place City law firms who provide a high quality service but charge significant sums for doing so?

There is no question that funders do enhance access to justice. They do so in an imperfect world where some cases are suitable for funding and others are not, but their absence from the legal system (either completely or via over and imprudent regulation) would mean that less meritorious claims are brought and less businesses are able to get legal redress for the wrongs done to them.

3) Financial firms fund cases that will make them the most money.

This is not strictly true and again misunderstands the nature of funding. A prudent funder will look to fund cases that deliver an acceptable level of return balanced against the risk of the case losing. They will also make a judgment on how that case sits within the existing portfolio, as risk appetite varies depending on the nature of existing cases under management at any one time. It is, therefore, not the case that financial firms simply fund cases that will make them the most money.

More generally, this is a curious objection. Would another business be criticised for selling the products or services that make the most money? I suspect not. Most companies will sell the products and services that make the most money and would, in a capitalist society, be considered prudent for doing so. Funding should not be singled out as being different from any other business.

4) Third party litigation funders do not care about consumers’ best interests.

Most funders, and particularly those that are members of the Association of Litigation Funders, invest in business disputes and do not come into contact with consumers. Participants in this market are typically sophisticated business people who engage in financing transactions on a regular basis; they are capable of understanding the terms being offered by a funder and whether to use their services. I am not sure, therefore, that this is a relevant concern in the current state of the market, where consumers do not make up the client base of the vast majority of funders.

Viewed more widely and perhaps too deeply, I am not sure it can be said that any business cares about consumers’ best interests. Rather most ‘for profit’ organisations seek to maximise profit for their shareholders and employees, and a satisfied customer is the result of this endeavour rather than the overriding objective. This is something that the American Chamber of Commerce must be only too aware of, given the large corporations that it represents, and is not in itself necessarily a concern – I am confident when I go to the supermarket that they do not have my best interests at heart, but they still deliver the products and services I require.

I would like to see Justice for Profit carry out a similar survey, but question stakeholders involved in the day to day running of the legal system instead of the general public. Perhaps then we could take some of the results seriously. For now, I am not sure they have done anything to advance credible public discourse on the funding market.

Chris Smith is a leader in business development at Vannin Capital.