UK Judge Signals Closer Scrutiny of Class Action Benefits to Lawyers and Funders

Judges will pay closer attention to the commercial benefits received by lawyers and funders in large-scale class action lawsuits as the number of such claims rises in the UK, according to the president of the Competition Appeal Tribunal. Mrs Justice Kelyn Bacon told a conference in London on Friday that her bench would examine the merits of opt-out claims more intensively at the certification stage.

She said the tribunal would look at the potential for a disconnect between the outcome for claimants and the gain for lawyers and litigation funding companies. The opt-out collective action regime for competition cases has been in place in the UK since 2015.

Under the system, millions of consumers are automatically included in claims unless they actively opt out. Bacon acknowledged that greater judicial scrutiny of claim merits would itself be controversial. She said the practical effects of the approach would be something that will no doubt be vigorously debated.

Her comments follow a recent tribunal decision that refused to certify a proposed claim brought on behalf of between 35 and 44 million people. The tribunal ruled that the average estimated loss to individual households was less than £20 and expressed concern about the potential distribution of damages.

Bacon noted that third-party litigation funding has become central to the collective actions regime because it enables claims to be pursued that would otherwise be unviable. She added that the system also raised legitimate questions about incentives and conflicts of interest because it separates the litigating class and their lawyers from the financial risk of the litigation.

The tribunal has maintained scrutiny of funding arrangements throughout litigation, including at the stage of settlement and distribution, she said. Bacon reminded lawyers that the Court of Appeal had confirmed the tribunal has wide discretion to review a funder’s return at any stage of the proceedings, including at the time of judgment or settlement.

Last month the Law Commission launched a consultation on extending the opt-out regime to consumer claims more widely. The body that advises ministers on law reform in England and Wales said consumer laws play a vital role in protecting consumers and promoting fair competition.

It added that effective enforcement can address persistent consumer harm, deter unlawful business practices and help ensure that consumers are treated fairly. A solicitor who co-founded a litigation finance broking business told The Times that the present system is inadequate for dealing with large-scale consumer claims such as financial mis-selling, environmental and product liability claims that are fairly modest in individual value but in aggregate are sizeable.

The Competition Appeal Tribunal president’s remarks are expected to fuel debate about the balance between access to justice for consumers and the costs imposed on businesses.