Litigation Funding Agreements (Enforceability) Bill [HL]

Committee stage
Monday 29th April 2024 Grand Committee

Committee

15:45

Clause 1: Enforceability of litigation funding agreements

Amendment 1

Moved by

[Lord Stewart of Dirleton]

1: Clause 1, page 1, line 14, at end insert—
“(ia) where the litigant is a litigant in person, expenses incurred by that litigant, or”Member's explanatory statement
This amendment ensures that the definition of litigation funding agreements includes agreements under which a funder agrees to fund expenses incurred by a litigant in person.

[The Advocate-General for Scotland (Lord Stewart of Dirleton) (Con)]

My Lords, I will address Amendment 1 alongside government Amendment 2 in one moment. I need not repeat in detail why this Bill is important, as we debated it so recently, just two weeks ago at Second Reading, but I want to address some of the points raised. I wrote to noble Lords—and to noble and learned Lords—but thought it important to put those matters on record here as well.

Clause 1 makes it clear that the Bill will have retrospective effect. The Government have carefully considered the point and decided that the Bill should have retrospective effect, meaning it will apply to litigation funding agreements in place before the PACCAR judgment and to any that may have been made between the judgment and the Bill becoming law. I thank noble Lords for their contributions, particularly my noble friend Lord Wolfson of Tredegar, King’s Counsel, who is not in his place today.

There were concerns about the possibility of claimants who negotiated new funding agreements following the PACCAR decision, having believed their first agreement to be unenforceable, facing the prospect of two funding agreements that could be enforced once the Bill comes into effect. In addition, reference was made by the noble Lord, Lord Carlile of Berriew, King’s Counsel, to a suggestion that the Bill’s retrospective effect may interfere with the Government’s obligations under the European Convention on Human Rights. That was raised in the context of the opinion of the noble Lord, Lord Macdonald of River Glaven, King’s Counsel, which was shared among noble Lords ahead of Second Reading. On behalf of the Lord Chancellor, I thank noble Lords for raising this issue and assure them that the Government are looking into the questions raised and hope to provide a further update on Report.

I regret that I cannot say much more than that at this stage, to allow the Government to review the matter, but I welcome the continued engagement from across the House, of which this Committee is a part.

I should also like briefly to mention the forthcoming Civil Justice Council review of third-party litigation funding, which was discussed by a number of noble Lords, and to address particularly the points raised by the noble Lord, Lord Marks of Henley-on-Thames, KC, and the noble Lord, Lord Ponsonby of Shulbrede, who raised a series of important questions on potential regulation of the market and limits on funders’ returns. As the Committee may be aware, since Second Reading, the Civil Justice Council published its terms of reference for the review on 23 April, which provide further detail on scope and timing. I thank noble Lords for their interest. If any noble Lords have further material they wish to share, I encourage them to contact the Civil Justice Council directly, which will doubtless welcome their contributions and expertise.

With those points addressed, I turn to the amendments. The Bill contains two clauses. Clause 1 amends Section 58AA of the Courts and Legal Services Act 1990. Its subsection (2) amends the definition of a damages-based agreement to provide that an agreement

“to the extent that it is a litigation funding agreement … is not a damages-based agreement”

—a DBA. Subsection (3) defines an LFA for the purposes of Section 58AA. Subsection (4) provides that the amendments are to be

“treated as always having had effect”.

The amendment addresses only the Supreme Court’s finding that certain LFAs are DBAs and does not seek to reverse the finding that litigation funders provide claims management services.

The Government have tabled two amendments to this clause. Amendment 1 remedies a perceived gap in the current draft definition of a litigation funding agreement, or LFA. As drafted, the definition of an LFA does not include reference to an agreement to pay the expenses of unrepresented litigants, which may occur where, for example, an unrepresented litigant receives funding for an expert report—a report from a skilled witness. Since the expert would not be providing “advocacy or litigation services” within the meaning of the legislation, an agreement to provide funding in this instance would not qualify as an LFA within the current draft definition.

The Government therefore believe that this should be addressed by bringing a small technical amendment to the Bill. This amendment will ensure that an LFA of the type rendered unenforceable by PACCAR, which is used to fund items of expenditure where the litigant is unrepresented, will be enforceable between the funder and the litigant. This reflects the policy objective of the Bill, which is to restore the position to that which existed before the Supreme Court ruling in July 2023, so that those LFAs of the type affected by the judgment are enforceable.

The second amendment tabled by the Government also addresses an ambiguity in the draft definition of a litigation funding agreement. As currently drafted, the definition of an LFA includes an agreement for

“the payment of costs that the litigant may be required to pay to another person by virtue of a costs order”.

However, there is a legitimate concern whether the expression

“by virtue of a costs order”,

may be interpreted too narrowly, and therefore be a source of litigation around its meaning regarding LFAs which neither specifically fund court or tribunal proceedings or envisage the issue of costs being determined by the court.

This amendment, which is, again, a small technical change, is designed to make it clear that the payment of adverse costs the litigant may be required to pay to another party, which would be funded under an LFA, includes the payment of costs following court, tribunal or arbitration proceedings, or as part of a settlement.

Clause 2 explains the extent, commencement and short title of the Bill, as I specified at Second Reading. I hope that noble Lords, and noble and learned Lords, will support these technical amendments, and I beg to move.

[Lord Marks of Henley-on-Thames (LD)]

My Lords, I will speak now because I have tabled the only non-government amendment before the Committee. It is a probing amendment.

The Minister, the noble and learned Lord, Lord Stewart, mentioned briefly the discussion about this Bill since the Second Reading debate—mostly in the context of the letter that he and the Secretary of State helpfully circulated—and the publication of the terms of reference for the review. That has been part of a wider discussion, and questions have been asked by a number of briefings. The briefing process for this Bill in relation to members of the public and interested or affected parties has been late; that has been a feature of the discussion, which has centred largely around questions on the need for regulation of the litigation funding market generally and on the issue of retrospectivity for the principal provision of the Bill, which the Minister mentioned.

I hope I will be forgiven for running through some of the arguments that were canvassed at Second Reading, largely in the light of the lateness of the briefings that we have had and the expressions of concern that there have been. A powerful argument has been advanced by some clients of litigation funders. They make the point—I foreshadowed it at Second Reading—that, in an unregulated market, litigation funders can effectively impose their terms on clients. This can mean that successful clients end up with only a very small part of the damages awarded to them, with the litigation funders taking the lion’s share; indeed, in one case that was brought to my attention and that of other noble Lords, funders have been in a position, following a case that they have funded, under their contracts of not only retaining all the damages awarded to the claimants but actively pursuing those claimants—their clients, in effect—for substantial costs that they incurred over and above the damages that were recovered. The clients say that that is most unfair; one can see their point.

The same people point to the DBA regulations—the Damages-Based Agreements Regulations 2013—and say, again with considerable force, that lawyers who enter into DBAs with their clients may not retain for themselves more than a prescribed proportion of the damages awarded, and that such lawyers are bound by other prescriptive regulations as to what they can set for their clients or in the contracts between them and their clients, the litigation funders having the upper hand in any negotiations of such agreements. They ask: why should similar restrictions as are imposed on lawyers in damages-based agreements not be imposed on litigation funders? They also say that, in any event, lawyers are already limited in the terms of what they can agree and are subject to comprehensive professional regulation, whereas litigation funders are not.

Noble Lords may remember that, at Second Reading, I said that, in the absence of regulation, there was

“a bit of a jungle out there”,—[Official Report, 15/4/24; col. 818.]

and that that should not be permitted to persist. Those expressing these concerns call for regulation of the litigation funders’ market generally, the primary purpose being to ensure more of a level playing field between funders and clients and the argument being that, if regulation of DBAs is appropriate for lawyers, why is it not for litigation funders?

As is well known to this Committee, the PACCAR decision gave legal effect to the essentially political argument that litigation funders should be subject to the DBA regulations. As we all know, this was because the Supreme Court decided that, if LFAs did not comply with the DBA regulations, which they generally would not, they would be unenforceable because LFAs involve the provision of case management services.

16:00

However, the PACCAR decision threatened to undermine the litigation funding market generally because the undenied and inescapable fact was that that market developed on the back of a belief that the DBA Regulations did not apply to LFAs. That was because a clear view had been taken that LFAs were not providing case management services. The Government’s view and the justification for the Bill—and, I believe, the overwhelming view expressed at Second Reading—was that litigation funding provides an avenue to access to justice in many cases where the litigants, or potential litigants, could not afford to fund representation or advice themselves.

Of particular importance in this context are class actions, such as that of the sub-postmasters against the Post Office. I know that the House as a whole was particularly persuaded by the point that the noble Lord, Lord Arbuthnot, made at Second Reading: that without litigation funding, the sub-postmasters would not have been able to bring their case before the courts at all. To use his memorable phrase: the bloody doors would not have been blown off, had it not been for the availability of litigation funding. That would have disabled, or made highly unlikely, all the welcome political consequences that have flowed from the decision of Mr Justice Fraser in that case.

However, class actions are not the only area where litigation funding is important. It plays, as we heard, a significant part in funding commercial litigation generally and has an important role in creating something of a balance by enabling smaller organisations or groups of individuals to fund litigation against more powerful opponents, public bodies or others who have deeper pockets than those who might be claimants. It also enables potential litigants to spread the risk of litigation over time and between themselves and litigation funders. It was in those circumstances and against that background that the PACCAR decision came as a great shock to litigation funders and the market generally and threatened to undermine it wholesale.

That brings me to the argument on retrospectivity because the other area of disquiet expressed in the briefings that we have had and the discussions that there have been has concerned the retrospectivity provision that the noble and learned Lord identified as being in Clause 1(4). The general principle is that special justification has to be demonstrated for the retrospectivity of legislation. That justification is found in the case of Finance Acts, where the Budget announces decisions that will take effect from Budget Day and the Finance Bill comes later but takes effect from the date of the announcement in the Budget. Everybody accepts that that is special justification within the terms of that principle.

The principle behind that view is that it is wrong to change the law retrospectively where such a change affects individuals or corporations who have arranged their affairs and made decisions or contracts on the basis of the law as it was, or was believed to be, and then find that law changed over their heads, in the worst case, so that what they thought was lawful when they entered into contracts or undertakings has now been found to be unlawful. It is also the case that concern has been expressed about interference with established property rights being a contravention of the European convention.

I completely appreciate that the Minister, the noble and learned Lord, Lord Stewart, has made the point that the Government are considering this matter with care—I await the results of that consideration—but I have come to the conclusion that that argument on retrospectivity is difficult to run. The case of LFAs that were entered into pre PACCAR is that pre-PACCAR LFAs were on the basis that LFAs were not DBAs and were therefore enforceable. Post commencement of this Bill, without retrospectivity, LFAs would be in the same position. Others may disagree but I have come to the conclusion that there is special justification for ensuring that, in the case of LFAs between the PACCAR decision and the commencement of this Bill, such LFAs should be in the same position as LFAs entered into in the interregnum or in the interim period. Otherwise, there would be confusion and uncertainty.

I quite take the point made by the noble and learned Lord, Lord Wolfson of Tredegar, about the difficulty of double LFAs and clients with two LFAs. In those circumstances, it is perfectly right that the Government should deal with that.

My amendment, which I described in the explanatory statement as a probing amendment, follows a number of questions that I asked at Second Reading. I am bound to say that it has been comprehensively and well answered by the letter from the Secretary of State and the noble and learned Lord, Lord Stewart, to which I referred and which was dated 24 April, as well as by the publication of the terms of reference for the review that had been announced in principle before Second Reading on 23 April.

I also make the point that I am pleased that the timetable is a speedy one: we are to have an interim report from the review in the summer of 2024 and a final review in the summer of 2025. My amendment said that the review must be completed by 31 August 2025. I do not claim that my amendment or my suggestion that the summer of 2025 should be the date for the final report influenced the Government in any way, but I am pleased to see that the Government realise that this is urgent and that the whole question of looking at the field of litigation funding is both important and urgent.

I was particularly pleased to see in the terms of reference that the questions to be addressed included whether there should be regulation and how, if there is to be regulation, it should be framed. In particular, there was the question of the funder’s return—this comes to the Post Office case, where such a derisory proportion of the overall damages went to the sub-postmasters—and whether there should be a cap. This will have to recognise the point made by the noble Lord, Lord Arbuthnot, about the risk taken by litigation funders; that risk has to be recognised and raises interesting, difficult questions.

The relationship between legal expenses insurance, crowdfunding and litigation funding—or, on the other hand, third-party funding—needs to be and is to be explored, as is the role of the courts and the relationship between litigation funding and litigation costs; those will no doubt consider how far there should be recoverability. The duties of litigation funders in relation to conflicts of interest are an extremely important area, I suggest, because we are talking about a tripartite—I am sorry for overrunning my time but I am nearly finished. There are three parties here: the lawyers, the litigation funders, and the clients. It is extremely important that conflicts of interest and potential conflicts of interest are recognised and responded to. Finally, there was the question of whether specific litigation is encouraged by litigation funding.

I support the government amendments; the noble and learned Lord has explained the reasoning, which holds good in all departments. We are very pleased about the review. We will argue that there should be regulation. I would expect the review to come to a similar conclusion, but we will see what it says. I do not suppose that there is any question of the Government’s not laying the review’s response before Parliament when it occurs, which was also sought by my amendment.

I am sorry to have gone over my time, but I hope that may have been helpful.

[Lord Carlile of Berriew (CB)]

My Lords, I will say a very few words that may help the debate. I wholly support the government amendments spoken to by the noble and learned Lord; they clarify the Bill in a way that was required.

I will just go back to something the noble and learned Lord said about what I had said at Second Reading about the Human Rights Act consequences. I referred to the opinion that had been given to us—again, very late in the day, like most representations in this matter—written by my noble friend Lord Macdonald of River Glaven. I am sure we all understand why he is not taking part in these debates; he feels that professionally he cannot because he gave an opinion, a view that I think all practitioners here would support. He said in that opinion that the convention rights arguments with which he was presented in his instructions were “arguable”—that was his word. That is not the highest level of certainty that those of us who have written a lot of opinions would ever put at the end of an opinion if we felt sure. They may be arguable, but they are not strong, and the Government are perfectly entitled to act as they are in that regard.

Then there is the question of retrospectivity. The answer to that is very simple. The Bill would be absolutely pointless if it were not retrospective, because it was created to right a wrong that nobody expected, and it is simply restoring to people the legal rights which they already had. I hope that we will not spend an awful lot of time in other stages of the Bill talking about retrospectivity.

I note that the Civil Justice Council’s new review—I agree with what the noble Lord, Lord Marks, said about its terms of reference—has had support from the Bar Council and the Bingham Centre, in a very well-argued piece that I think was circulated to most Members of the Committee. It was also supported by what we might call the interest groups: the Association of Litigation Funders and the International Legal Finance Association, which have taken a pretty objective view of the proposals in this Bill. All are of the view that the Civil Justice Council, as it is set up by the terms of reference, is the appropriate place for the review to take place. Of course, it leaves some flexibility and some obligation, because a rule-making body such as the Civil Justice Council can change the law in small ways to ensure that appropriate procedures are followed.

For reasons which some noble Lords will recognise, I am an enthusiast of independent reviewers—because I have been one—but I am not an enthusiast for an independent reviewer in this situation. Although an independent review would undoubtedly be fascinating, it would have no power whatever. We need to get nearer to the rule-making powers to ensure that the law in this area is clear, followed, applied by the judges and, above all, understood clearly by the courts.

[Baroness Bennett of Manor Castle (GP)]

My Lords, I rise very briefly, acutely aware of the legal weight in the Room, to which I add not a gram—although I cannot help noticing the gender balance. I apologise for not speaking at Second Reading. My noble friend Lady Jones of Moulsecoomb spoke in the Second Reading debate but she is currently taking part on the Leasehold and Freehold Reform Bill in the Chamber. I listened very carefully to the words of the noble Lord, Lord Marks of Henley-on-Thames, who is satisfied with the review process that we have going forward, and I will be guided by that.

I want to stress that where we are going now is still not an adequate solution to the problems at hand. At Second Reading, my noble friend said that we need to put

“energy into thinking about a better solution”.—[Official Report, 15/4/24; col. 810.]

We have to do that in the context where we have a crucial, huge inequality of arms—Horizon is the obvious example—in an economy dominated by an increasingly small number of oligarchic, giant, often multinational companies that are deciding how things work in our economy and society, of which people are very often the victims. We have a structural problem: the law now is not equipped to deal with the structure of our economy and society. I conclude only by noting that justice unfunded is justice denied, and there is far too much justice denied to individuals in our society when they are crushed by the weight of corporations or the state.

16:15

[Lord Sandhurst (Con)]

My Lords, like others here today, I support the Bill and the amendments which the Government have laid. Like others, certainly including the noble Lord, Lord Carlile of Berriew, I am grateful for the Bingham Centre’s helpful briefing note. It sets out the issues clearly, in particular in respect of retrospectivity and the need for the Government to give good reasons for that, which I believe they have done.

What is important in this case is that before 19 July 2023, government policy endorsed the use of litigation funding agreements. There had been discussion about whether they should be regulated and how they should be managed, but the policy was absolutely clear. I referred to that at Second Reading. The Supreme Court, for good reason, did not have to address that issue of policy as it was not appropriate, but the effect of its decision is that litigants have lost much-needed support. If we are to ensure access to justice, particularly against monopolists, we now require a statute to undo that Supreme Court decision and do the best we can to restore the status quo ante. We have to hope that this legislation does not induce a spate of future litigation of the wrong satellite nature, but simply allows matters to proceed as they were until July last year.

For good constitutional reasons, retrospective provisions are not the norm, but when Parliament reaches a considered decision to pass legislation that is fully retroactive and does so for good reasons then, providing the legislation is drafted carefully, the Supreme Court has ruled that it is not contrary to our constitutional norms. In that respect, I refer to its decision in AXA General Insurance Limited and others v Lord Advocate and others, reported at [2011] UKSC 46.

I agree entirely with the noble Lord, Lord Carlile, that we should not fear challenge at some later date in the ECHR. The balancing reasons are absolutely clear: this is for access to justice. There may be no perfect answer, but this is the right route—or the least bad route. I am confident that the Government will look further at the detail of the retroactivity provisions and will not bring this Bill to finality without taking care to ensure that it is properly addressed. In doing so, they will have weighed the public interest in access to justice and in established positions that might be damaged by the Bill. It is pretty clear to me, and I think to others here, that the overwhelming public interest is in allowing matters to be restored to the general form of what everybody thought they were in the summer of 2023.

While I am sympathetic to the noble Lord, Lord Marks, and his amendment, I am persuaded and now agree that the appropriate course is to leave this to the Civil Justice Council. It is now seized of the matter and will have the benefit shortly of the report from the European Law Institute—the noble and learned Lord, Lord Thomas, is a member—and will guide this country into making good regulations. Regulation will not be straightforward, but it has been managed with some trial and error in conditional fee agreements, and we are now without problems there. It has been managed in damages-based agreements, so I would be surprised if it could not be managed in litigation funding agreements, albeit that I am sure that some lawyers will do well out of satellite litigation in the early stages.

[Lord Thomas of Cwmgiedd (CB)]

My Lords, I thank the Government again for bringing this matter with such expedition before this Committee. I wish to make two observations. First, I warmly welcome the Constitution Committee’s report, which is helpful and will no doubt help the Government further on the retrospectivity point.

Secondly, I am glad that the noble Lord, Lord Marks, put forward his amendment because it enables us to thank the Civil Justice Council and the Government for putting the terms of reference in such broad forms. As I mentioned at Second Reading, there is a lot of experience worldwide on that, but since then I have discovered more about the position in Australia and hope that the work done by the European Law Institute will in part reflect the substantial Australian experience. The Civil Justice Council will be able to look at that. Having heard what has been said in Australia, one has to take care, as not all are as responsible as the members of the litigation funders’ body. Others are tempted to enter into this area, so one might see that Australia has a lot of experience of how to deal with this, looking not to the creation of yet another regulatory body but to whether the courts themselves, through the Civil Procedure Rules, can be given the powers and guidance necessary to deal with the issues.

No doubt we will return to this in the autumn of 2025 for a very interesting debate.

[Lord Etherton (CB)]

My Lords, I just want to probe the Government to an extent on the involvement of the House once the Civil Justice Council has finished its review. It is an independent body. It is not itself a rule-making body; the rules are made by the rule committee. While I absolutely welcome the opportunity for the Civil Justice Council, with its expertise, to carry out its review, no changes to the rules will be made without a statutory instrument. My question for the Minister is: at what stage in the process will we have an opportunity of commenting on any recommendations made by the Civil Justice Council? That includes, for example, what my noble and learned friend Lord Thomas of Cwmgiedd has just said on whether a recommendation is made to deal with the question of regulation through amendment of the civil justice rules.

[Lord Ponsonby of Shulbrede (Lab)]

I will make the briefest of comments. I welcome the amendments put forward by the Minister. I very much take to heart the point made by the noble Lord, Lord Carlile, that the Bill would be pretty pointless unless there was an element of retrospectivity to it. I read the information that we were sent by the Bingham Centre, which was informative and interesting, and by the Bar Council. I absolutely understand the primary purpose behind this legislation.

The noble Baroness, Lady Bennett, commented on the legal balance in this Committee. I join her, as a non-lawyer; I cannot match her for gender, I am afraid. However, I can talk about the clients who are paying for this. I might have made the point at Second Reading that, by my understanding, the bulk of the people who take advantage of this type of funding would be at the sort of middle to large-sized company where I was chief executive. It is a way of cash management, in essence, because you do not know what litigation is on the horizon and you do not want to spend too much time on the litigation because that takes time away from running the business. So having these ongoing litigation funding arrangements is a way of managing risk. For me, that was the main purpose of occasionally entering into those agreements, rather than the litigation itself.

The other primary point worth repeating is that a lot competitors out there would like this business—Singapore, Australia, Dubai and elsewhere. I was very aware of that when I was running a business. I was regularly approached by people wanting to reach alternative ways of resolving any disputes that may arise.

Nevertheless, given those thoughts from a client’s perspective, I welcome this legislation. The English and Welsh model should be as up to date and competitive as possible. In that sense, I welcome the Bill and the Government’s amendments.

[Lord Stewart of Dirleton (Con)]

My Lords, I thank noble Lords and noble and learned Lords for all their contributions today. I will try to respond to the substance of the points that noble Lords have raised.

The Supreme Court judgment in PACCAR rendered many litigation funding agreements unenforceable. Uncertainty around litigation funding risks having a detrimental impact on the attractiveness of the England and Wales jurisdiction as a global hub for commercial litigation and arbitration, as well as on access to justice more broadly.

Through this Bill, we will restore the position that existed before the Supreme Court’s ruling in July 2023 so that litigation funding agreements affected by the judgment are enforceable. This will also ensure that claimants can get access to litigation funding in order to bring big and complex cases against bigger, better-resourced corporations, which they could not otherwise afford. In saying that, I reflect the principled concern raised by the noble Baroness, Lady Bennett of Manor Castle, in her brief comments and echoed by the noble Lord, Lord Ponsonby of Shulbrede. It is a leitmotif that ran through much of our discussions at Second Reading; we are all seized of the difficulties to which inequality of arms can give rise.

The remarks of the noble Lord, Lord Marks of Henley-on Thames, which went over much of the history of litigation funding as we now have it—or as we had it up to the point of PACCAR—gave us a useful reminder of some of the issues at stake. It is also of use for us to consider the background to the rise of litigation funding and to bear in mind the objections that law has traditionally had against third-party litigation of this sort—the traditional objections to the pacta de quota litis, which would allow someone else a controlling hand in the manner in which litigation was carried out, perhaps to the detriment of the person in whose interest that litigation was nominally being pursued.

16:30

The Bill will enhance access to justice and the attractiveness of the thriving United Kingdom legal sector, which contributes more than £34 billion per annum to the United Kingdom’s economy. The Government are looking into the issues raised around the Bill’s retrospective effect and will provide a further update on Report, but I acknowledge gratefully the overall views of the noble Lords, Lord Marks of Henley-on-Thames and Lord Carlile of Berriew, and my noble friend Lord Sandhurst on where retrospectivity stands in relation to the Bill.

I thank the noble Lord, Lord Marks of Henley-on-Thames, for the amendment that he put into this debate—a probing amendment, as he said—and for his helpful comments at Second Reading on the same matter. The Government do not support the amendment; I will set out why but, in addressing it, the noble Lord covered much of the same ground. I hope not to detain the Committee for too long on the point, but the amendment would require the Lord Chancellor to establish an independent review of the impact of the provisions in the Bill on the enforceability of litigation funding agreements in England and Wales; it also sets out the timing and factors that the noble Lord believes that such a review should consider. I gratefully adopt the views of the noble Lord, Lord Carlile of Berriew, on the role of the independent reviewer in these circumstances: I agree with him that, in the case we are dealing with at present and in terms of the Bill with which we are presently engaged, such a step would not be necessary.

I also note and adopt the views of the noble and learned Lord, Lord Thomas of Cwmgiedd. He anticipated the conclusions that the CJC’s review might reach and addressed the view that it might be better dealt with in the context of the rules of court themselves, as opposed to by any other vehicle. As we have heard, the Lord Chancellor has already asked the Civil Justice Council—the body that oversees and co-ordinates modernisation of the civil justice system in England and Wales and is chaired by the Master of the Rolls—to undertake an independent review of the third-party litigation funding market in England and Wales. I welcome the Committee’s broad support for the terms under which that review will take place.

The attention shone on litigation funding by the PACCAR judgment means that this is an opportune moment to review the status of the market. As the Committee has heard, the CJC published its terms of reference just last week, on 23 April, providing further detail on scope and timing. A working group has now been established; it will be co-chaired by Mr Justice Picken and Dr John Sorabji. In addition, a consultative group is also being established. It will directly inform the work of the review and provide a larger forum for expert discussion in support of the working group.

There are many similarities between what the noble Lord, Lord Marks, seeks to achieve via his amendment and what has already been agreed with the CJC with regard to scope. For example, the CJC will consider issues around regulation, safeguards for claimants and whether a funder’s return on any third-party litigation funding agreement should be subject to a cap; again, as I said, this principled concern occupied much of our time at Second Reading. The CJC will look to provide an interim report by the summer of 2024 and a full report by the summer of 2025, aligning with the timings set out in the noble Lord’s amendment. I cannot say in answer to his question that his amendment was directly responsible for those timings; I prefer to ascribe the outcome to a happy synchronicity between him and the Government on this point.

I am also grateful to the noble and learned Lord, Lord Thomas of Cwmgiedd, for his observations on the Constitution Committee’s report and in relation to the work carried out by the European Law Institute, also mentioned by my noble friend Lord Sandhurst, as well as the examples he gave of the work being carried out to observe practice in Australia.

As I said at the outset of my remarks, this matter comes against a background of the historic concern of the law about third-party funding and the need to get it right in order to create a greater approximation to the equality of arms, which it should be the object of all courts to accomplish. There were concerns about the practice of claims farming, which is an example of just the sort of interruption to the appropriate processes for finding justice that the intervention of third parties in litigation can create. The CJC will provide us with a solid, researched and considered basis on which to move forward.

The noble Lord, Lord Marks of Henley-on-Thames, referred to the “jungle” in which we can be found in the absence of adequate regulation. It is perhaps appropriate—to strain that metaphor—that it is in such a jungle that leonine contracts which stand uncapped, of the sort that the noble Lord referred to in his address, should be able to prosper and flourish, and we look to the CJC to prevent that going further.

Against that background of timings and the view that much of what the noble Lord seeks is foreshadowed by the CJC in its terms of reference, I respectfully submit that his amendment is not necessary and will duplicate efforts, so I urge him not to press it at this stage.

[Lord Marks of Henley-on-Thames (LD)]

My Lords, I have seldom had such pleasure in not pressing an amendment. As the noble and learned Lord said, the CJC review is precisely what we were looking for. Having looked at who is concerned and how they will deal with it, I have no doubt at all that it will be thorough, and we have had some very helpful remarks from everybody this afternoon, so I will not press my amendment.

Amendment 1 agreed.

Amendment 2

Moved by

[Lord Stewart of Dirleton]

2: Clause 1, page 1, line 16, after “order” insert “, an arbitration award or a settlement agreement”
Member’s explanatory statement
This amendment ensures that the definition of litigation funding agreement includes agreements under which a funder agrees to pay costs relating to litigation that arise by virtue of an arbitration award or a settlement agreement, as well as by virtue of a costs order.

Amendment 2 agreed.

Clause 1 agreed.

Amendment 3 not moved.

Clause 2 agreed.

Bill reported with amendments.

Committee adjourned at 4.39 pm.