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Financial Times Editorial: “Litigation Funding Needs Better Oversight”

The Financial Times Editorial Board released an opinion piece on the need for oversight for the litigation funding industry in the UK. In the editorial board’s estimation, litigation funding is a more than £2 billion industry in the UK, and it operates with very little oversight. According to the editorial, this lack of regulation may lead to conflicts of interest as law firms set up joint ventures with funders.

As the editorial board points out, the relationship between clients, lawyers, and funders is “not problem free. At its heart is lawyers’ primary duty to act in their clients’ best interests, then their duty to the court and to upholding the rule of law. These should be above their duty to their firm. Even at arm’s length, the interest of a client, the interest of a firm and the interest of a funder may diverge,” the editorial reads in part. “Lawyers are expected by their watchdog, the Solicitors Regulation Authority, to manage any conflict appropriately. Tightening the relationship between funder and firm only makes that more difficult, particularly when it comes to setting up a fund that will expressly back the firm’s own cases.”

The piece concludes with a reminder that litigation funding in the UK is currently unregulated, and that the system of rules that arguably could be applied to litigation funding is patchy and irregular. According to the editorial board, “such patchy regulation coupled with fertile ground for conflicts adds up to a troubling outlook that needs more scrutiny.”

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