November Business First

BEST PRACTICE
The tricky business of litigation
funding in Northern Ireland
Matthew Howse, Litigation and Dispute Resolution Partner at leading law firm Arthur Cox, explains the nuances of
litigation funding in Northern Ireland.
or professionals such as company
financial directors, who deal largely in
Fthe ‘black and white’ of numbers, the
risk and uncertainty associated with pursuing
a legal claim can often be difficult to justify
when evaluating the costs of running a case to
conclusion.
The availability of third party funding to
help meet litigation costs can often be
something that is welcomed by those charged
with keeping a steady hand on the tiller of a
company’s finances.
That is certainly the case in England and
Wales, where the growth in the use of
‘litigation funding’ products has been fuelled
by changes to the legal position, and by large
corporates and their representatives making
active use of these changes.
Risk
Traditionally, a party to litigation funds its
own legal costs, either on an interim basis as
the case progresses or at the end of the case.
A party who has a lawful interest or some
other close connection to the litigation –
shareholders or creditors, for example – can
legitimately fund a party’s case, although they
should be aware that they risk being made
liable for the costs of the litigation if the case
is unsuccessful.
So what are some of the alternatives to the
traditional funding model available in
Northern Ireland?
Professional third party litigation funding is
where a commercial organisation,
unconnected to the litigation in question,
funds the litigation with a view to making a
profit.
Integrity
Traditionally, such funding fell foul of the
ancient rules relating to ‘champerty’ and
‘maintenance’, designed to uphold the
integrity of the litigation system – namely to
prevent trafficking in litigation for profit, and
to prevent people with an improper motive
influencing litigation.
In England and Wales, those rules have
been substantially relaxed over time. And in
the Republic of Ireland, a case has been
appealed to the Supreme Court (likely
hearing early 2017) which will address the
question of whether the existing prohibition
on third party litigation funding in the
Republic should be lifted.
In Northern Ireland, reported cases are
scant, largely because the statutory
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framework is not on all fours with that in
England and Wales.
Whilst in England and Wales there is an
Association of Litigation Funders, established
in 2011 to regulate the conduct of its
members, there is no such body in Northern
Ireland.
Reforms
This is because there is simply not an
established market in Northern Ireland, for
the legal and technical reasons mentioned
above, as well as other factors including
cultural reasons (“if I can’t afford to bring a
case, I won’t bring it”); the legal aid system in
Northern Ireland (although subject to intense
review and reform, legal aid still remains
more widely available than in England and
Wales); and for other, less tangible reasons.
The “no win, no fee” system (conditional fee
agreements), which TV adverts are fond of
promoting, is legal in England and Wales
(although greatly scaled back of late), but is
not currently legal in Northern Ireland.
The recent ‘Access to Justice Review Part 2’
report has, however, shown support for
introducing this practice in certain cases in
Northern Ireland and time will tell how far
these reforms go.
Finally, after the event insurance (ATE), a
type of insurance enabling plaintiffs to insure
against the risk of having to pay a defendant’s
legal costs, and cover their own
disbursements such as barrister’s fees, is not
only legal in Northern Ireland, but also
increasingly common and there are providers
offering these products. Existing insurance
policies should be checked for the existence
of pre­existing insurance cover for legal
claims.
It remains to be seen whether support for
alternative methods of funding litigation in
Northern Ireland will grow.
What is clear is that there are changes on
the horizon – at Arthur Cox we will give you
all the guidance you need on this sometimes
complex area.
MOREINFORMATION
The Litigation and Dispute
Resolution team at Arthur Cox is
well positioned to advise on the
emerging trends in the civil
justice system in Northern
Ireland. Please call 028 9023
0007 for further information from
Matthew or your regular Arthur
Cox contact.