Here, we will take a look at how litigation funding can play a part in the outcome of collective action settlements.

To begin, it is important to understand a little about litigation funding. It involves a third party funding the costs of a party to the action. This will be done in exchange for recompense if the action is successful. The contract is formalised by a litigation funding agreement.

You can find information about how litigation funding operates at sites such as //www.novo-modo.co.uk/litigation-funding.

Approval of Settlements in Collective Actions

When collective proceedings have been confirmed as an opt-out, the settlement has to be approved by the Competition Appeal Tribunal. Any case commencing after 1st October 2015 is subject to the Competition Appeal Tribunal Rules 2015. This is to ensure that judicial oversight protects the interests of the class action members in the settlement deal.

Conflicting Interests in Funded Claims

Mostly, the interests of the litigation funder and the class are aligned throughout, but issues may occur once the settlement stage is reached. Mounting costs could benefit the funder as they may benefit from a multiple of their investment, while the class representative may wish to settle early, even at a lower award, in the best interests of the class members as costs rise.

The CAT will have a role in settling any disputes since it has an active role in examining the fairness of any collective settlement. This will include analysing the steps the parties have taken to reach the settlement and the actual settlement amount to ensure everything has been done in a fair way.

Future Considerations and Conclusion

Although there has been concern in the past that litigation funders can drive group claims, recent judgments have shown that they operate under limited circumstances. The role of the funder will be addressed in a Civil Justice Committee report due in the Summer of 2025.

If you are seeking funding, it is important to discuss any issues that are likely to arise on settlement with your litigation funder.