Claims in respect of Loss or Damage arising from Competition Infringements (Competition Act 1998 and Other Enactments (Amendment)) Regulations 2017 — House of Lords, 2017-03-02
Topic: Domestic Commerce
Robin Granville Hodgson (Conservative, Centre-right): My Lords, I thank my noble friend for his explanation of this legislation. I know that he has been landed with it at the last minute and he has taken on this pretty technical subject with his usual verve and aplomb. Despite being technical, the subject is nevertheless important in that it has at its core the important issue of the protection of consumers Turning to the legislation, my noble friend drew attention to the fact that this is a twin-track approach. We have taken the whole EU directive but maintained a good deal of existing UK law and practice alongside it. He referred to it as gold-plating but, as he equally fairly pointed out, the approach was approved of and supported by the practitioners. In those circumstances, who is to complain about that? My concern about these regulations is that the Government have not taken the opportunity to bring forward, or at least signal their intention to bring forward, proposals to make sure that sufficient transparency and accountability exist for a regime by which funding is provided by third parties otherwise completely unconnected with the action to enable competition and other cases to be brought before the court. This process is known as third-party litigation funding Before going any further, I must remind the House that in my registered interests I am a non-executive chairman of a company that provides analytical services to companies involved in third-party litigation funding. The company is not party to the actions, it merely provides services and has no direct involvement. That having been said, I shall get back to the background The growth of third-party litigation funding has been prompted by two important developments. First, there is the general increase in contingent fee litigation, where any damages awarded do not go exclusively to the injured party but can be shared with others, including those who provided the means to bring the case to court. This increase has arisen in large measure following the passage of the Legal Aid, Sentencing and Punishment of Offenders Act, which in turn implemented the measures recommended by Lord Justice Jackson in his 2010 report on the costs of civil litigation. That is the first big driver of growth Secondly, there has been the change brought about by the Consumer Rights Act 2015, referred to by my noble friend in his opening remarks. This made the important change of abandoning the traditional approach of opting in to a case—you had to indicate your wish to be involved in order to participate—in favour of an opt-out approach where unless you say, "I do not want to be part of the case", you are assumed to be in. As a result, huge and potentially hugely profitable cases have become easier to lodge. The numbers are huge. The Mastercard case now before the courts, again referred to by my noble friend, has been brought on behalf of 46 million individual consumers and alleges damages of £14 billion. Importantly, an external funder put up £40 million on terms that are not entirely clear to bring the case to court It is important that my remarks today should not be seen as an attack on the concept of third-party litigation funding. It has a useful role to play in intercompany disputes and in helping to bring consumer cases. Many third-party litigation funders are entirely respectable and open their activities to public scrutiny. At least one company is listed on the Stock Exchange. However, we have an iceberg problem. What is going on with that part of the industry operating below the water line? As an industry in the United Kingdom, third-party litigation funding is virtually unregulated. The Association of Litigation Funders, the ALF, is a voluntary, self-governing organisation. I understand that there are currently seven members but anecdotal evidence suggests that there are more than 20 firms operating in this field in the UK, so less than half belong to the association. It has a code of conduct but lacks any real enforcement capability. The maximum fine it can impose is £500—trivial given the nature of the sums we are discussing—and the maximum penalty is expulsion from the association. That would not prevent the particular firm continuing to provide funding for third-party litigation Moreover, funders have benefited from a loophole in the law. When the Jackson proposals on contingency litigation were brought in with the LASPO Act, they included various restrictions on insurance companies and legal practices involving themselves in funding third parties. I imagine that Lord Justice Jackson’s purpose was to inhibit the growth of a litigation culture. However, no such inhibitions have been placed on the work of third-party litigation funders, who have thrived commensurately.