Critics snipe at third-party litigation funding code

The proposed regulation of third-party litigation funders has come under fire for failing to bring full transparency to the sector.

A draft code of conduct seen by The Lawyer stipulates that the assets of members of the proposed Third Party Litigation Funders Association should exceed liabilities, and that the ultimate parent company be a regulated insurance company covered by EU capital adequacy standards.

But according to a senior litigation funder, the code goes too far. “The contract [between client and funder] will set out exactly what the obligations are,” he said. “This isn’t something that should be dictated by regulators – that would just stifle the sector.”

According to one senior litigator, however, the code treats third-party funders with “leniency”. Another litigator criticised the code for not requiring funders to disclose where they source money from, saying: “You need full disclosure – it’s very difficult to see how these instruments are structured.”