Legal News

Third-Party Litigation Funding Stepping up in U.K.

By Ashby Jones

A jolly bit of news from the other side of the pond caught our eye today. According to this article from Legal Week, law firms in the U.K. are getting hip to a new trend: taking other people’s money to fund lawsuits. “Eight out of 10 of London’s top law firms are already using or assessing external funding for litigation and arbitration cases,” reads the article, “marking a dramatic move of third-party funding into mainstream practice.”

According to the story, Clifford Chance is currently using third-party funding for an arbitration case, while Allen & Overy, Freshfields Bruckhaus Deringer, Herbert Smith and Lovells are all actively seeking funding for a number of cases. Even Skadden is getting into the action, reportedly using third-party funding in an arbitration case.

Under the model, outside investors offer litigation funding in return for a slice of the damages. Skadden European arbitration head Paul Mitchard told Legal Week: “Funding is definitely here to stay. It is a significant development in dispute resolution, where litigation and arbitration are now being viewed as a commercial venture for outside funders for the first time.”

So many good things that start in the U.K. ultimately find their way here, of course (i.e., The Office, fried Mars bars, the English language). So is third-party funding, which is banned in many jurisdictions, on its way toward mainstream acceptance?

It’s possible. Hofstra law professor Monroe Freedman thinks it should be. “I think it’s a very good thing,” he told the Law Blog. “The Supreme Court has ruled several times that the right to sue is really a First Amendment right to petition for redress of grievances. It seems to me therefore that enhancing the ability to fulfill that constitutaional right is a good thing.”

Stanford law professor Deborah Rhode has a slightly different take. She says that under the current regime of most U.S. jurisdictions, only lawyers are permitted to fund suits. “If you opened that up, and allowed others in, it would likely drive down the price of legal services.” In other words, those standard 1/3 contingency fees would likely fall down a la the London Bridge.

Law Blog readers, any thoughts on this? We’ve heard that third-party funding is popular in some quarters in the U.S., such as on Brooklyn’s Court Street, but how popular has it become?

Full post as published by Law Blog - WSJ.com on March 20, 2008 (boomark / email).