Litigation Funding and Access to Justice

Statistics from the Ministry of Justice demonstrate that between 2005 and 2018, government expenditure on legal aid, corrected for inflation, fell from approximately £2.6 billion to approximately £1.6 billion.

18 October 2019

Funded Disputes

Statistics from the Ministry of Justice demonstrate that between 2005 and 2018, government expenditure on legal aid, corrected for inflation, fell from approximately £2.6 billion to approximately £1.6 billion.

In 2005, legal aid was a shadow of its past glories; its reach had already been removed from almost all aspects of civil litigation. The cuts since have destroyed the last bastions of civil legal aid.

The reasons for government’s long-held policy of reducing legal aid are clear. Whilst there is scope to dispute the oft-stated assertion that the UK has the highest legal aid budget in Europe, it is undeniable that legal aid is hugely expensive. The only person for whom £1.6 billion is not costly is the person currently footing a £2.6 billion bill.

However, cuts to legal aid impede access to justice, a basic and crucial element of the rule of law. For years, the Ministry of Justice has battled with how to maintain access to justice whilst delivering the policy to reduce, and continue reducing, the legal aid budget.

The CFA Regime

The nineties brought in conditional fee agreements. They became the keystone providing access to justice in large parts of our civil justice system, particularly the personal injury sector.

By 2009, the Ministry of Justice concluded that the financial imbalances that the ‘old’ CFA regime had created necessitated a review.

Amongst his other findings, Lord Justice Jackson concluded that the promotion of litigation funding was an answer to the restriction on access to justice that restricting the ‘old’ CFA regime and slashing legal aid created.

But is there any truth in Lord Jackson’s conclusions? Has the subsequent promulgation of litigation funding promoted access to justice or not? Or will litigation funding have more to do with profits and less to do with access to justice, as one might argue of the CFA regime before it?

Litigation funding

From the outset, the economics of litigation funding discourage the suggestion that it truly increases access to justice. The first proponents of litigation funding were ‘Davids’ looking for help to topple their ‘Goliaths’, but they were nonetheless Davids with 7-figure claims.

Litigations funders are clearly aware of the dissonance between the economic realities of funded claims and benefit of funding’s reputation for access to justice. Earlier this year, Therium announced the establishment of a £1 million fund to provide not-for-profit litigation funding to facilitate access to justice. Whilst the exact parameters of the fund are not known, it is difficult to see how the scheme will not have the effect of improving access to justice. But it is the fruits of litigation funding, rather than litigation funding itself, that have delivered these benefits.

Were it not for developments outside the realm of litigation funding, the conclusion that the evidence to date points to is that much touted benefit of litigation funding does not live up to its billing. Its financial requirements mean that its improvements to access to justice would be illusory.

Group litigation developments

Recent developments to group claims mean that, now, crowds of claimants can afford the benefits of litigation funding where no member of that crowd could. Walter Merricks’s claim against Mastercard will likely be the most far-reaching of those claims, but it is not the best illustration of the potential for good that they unlock, when coupled with litigation funding. That accolade surely goes to Bates v Post Office. If the case of the Claimants’ in these proceedings is to be believed, many lives had already been ruined as a result of the Defendant’s actions. Funding has given them the possibility of redress.

Again, it is Therium that is backing the claimants’ case, cementing the reputation of the funder for improving access to justice.

However, unlike its admirable pro bono project, its interest in the Post Office proceedings are wholly commercial. If successful, it stands to make a significant return on its investment. And, rather than the pro bono schemes that funders might set up to underline their commercial success, herein lies the real potential for litigation funding to improve access to justice.

The costs of litigation funding have been falling steadily as it matures as a market, the result of greater competition and innovation from new entrants joining the market. In ways that the funders are quick to publicise, the market has moved away from its original David and Goliath image. A modern user of litigation funding may well be able to afford to do without funding, but choose to use it for other reasons.

This should not be a surprise – it mirrors the evolution of CFAs, an issue famously fought over by Naomi Campbell. Hopefully, the litigation funding market will parallel the rise of CFAs in improving justice as well, but without the perverse incentives that the ‘old’ regime generated. The current indications are good.