Three leading litigation funders are in the final stages of drafting new rules governing third-party funding in the U.K.
The trio is made up of Susan Dunn of Harbour Litigation Funding (part of hedge fund MKM Longboat), Allianz's Christian Stuerwald and Wayne Attrill of IMF.
Their draft code, which was discussed at a summit held by the Civil Justice Council (CJC) earlier this month, includes provisions to stipulate the level of control or influence a funder can exercise over a client, as well as covering issues such as minimum terms of contract, complaints handling, marketing and sanctions.
It is understood that the majority of stakeholders are in favor of developing mandatory self-regulation that would see funders expected to sign up to the code.
Although no decision about who would formally draft the code has been made yet, it is thought that either the CJC itself will take up the responsibility, or an association of funders.
As an incentive to get funders to sign up, those bound by the code may be able to avoid handing over money when an order is made for security of costs and could instead use either deeds or insurance.
The Solicitors Regulation Authority is also considering introducing a rule to prevent solicitors from dealing with funders not signed up to the new code.
Dunn, Stuerwald and Attrill are now amending the draft and will put it to an executive group later this year.
CJC Chief Executive Robert Musgrove commented: "There are clear incentives for a code to be put in place quickly as it will bring about stability in the market."
External funding for litigation has become increasingly popular in recent months with many of the U.K.'s top firms launching initiatives. Although this funding method has been traditionally popular on the claimant's side, a handful of major companies are now trying to defend high-stakes litigation with third-party funding.
For more news, commentary and analysis on the international legal market, visit LegalWeek.com
