Lawyers for three firms went to court last week to seek payment of £7m in costs from third-party funders in a landmark case.
If they lose, despite having won the substantive action, their clients - shipping lines who were wrongly accused of setting up a cartel that drove the claimant out of business - will have to meet the cost of the litigation out of their own pockets.
Berwin Leighton Paisner (BLP), Constant & Constant and DAC were denied payment of costs by the losing party, Yeheskel Arkin, on the grounds that he is penniless. His case was funded through a conditional fee agreement that did not require him to take out after-the-event insurance to cover the other side's costs.
As a result, the firms are seeking payment of their costs from a company named Managers and Processors of Claims (MPC), which funded Arkin's accountant expert witnesses during the substantive litigation. MPC is currently seeking to financially support claimant cases arising out of the sinking of The Prestige off Spain earlier this year.
The law firms argued in court last week that recent cases in which third-party funders, such as MPC, were found not to be liable for the other side's costs did not apply in this case. The case law referred to was Neil Ham-ilton's case against Mohamed Al Fayed, and the infamous Factortame litigation, involving claims brought by Spanish fishermen.