The London legal services sector is grappling with significant challenges due to the government’s failure to address the implications of the Supreme Court’s Paccar ruling, which deemed certain litigation funding agreements unlawful and unenforceable. Lawyers have warned that this inaction is jeopardizing the City’s business environment and diminishing London’s status as a global legal hub, according to a report by The Times.
Mastercard Class Action Settlement Sparks Debate
The issue has gained prominence following the recent settlement of a class action against Mastercard. The lawsuit claimed that Mastercard’s fees to merchants inflated consumer prices over a 16-year period. After nine years of litigation, the settlement amount is estimated to provide as little as £4 per claimant across 46 million potential beneficiaries.
The London-based litigation funding company Innsworth Advisors, which backed the claim, has challenged the settlement, arguing that it was “too low and premature.” Critics say the small payout offers little incentive for consumers to join such claims, while lawyers receive significant fees. However, Walter Merricks, who initiated the claim, defended the outcome, emphasizing that the collective action regime was designed for cases involving small individual consumer losses.
Impact of the Paccar Ruling on Litigation Funding
The Paccar ruling has created uncertainty in the litigation funding market, leaving claims in limbo. The decision has sparked widespread concern, with legal experts warning that unresolved issues could harm law firms and restrict access to justice for individuals and small businesses.
Despite commitments from the previous government to address the ruling through legislation, no corrective action has been taken. This delay has stalled funding activity, potentially driving major dispute resolution work to other global centers such as Paris, Singapore, and New York.
London’s Position as a Global Legal Hub at Risk
The ripple effects of the Paccar ruling threaten to weaken London’s standing as a premier destination for class actions and dispute resolution. Legal professionals argue that without urgent action to clarify the rules surrounding litigation funding agreements, London’s legal services sector will suffer significant damage.
Experts emphasize the need for a balanced approach that recognizes the importance of third-party litigation funding while ensuring proper safeguards for claimants. The Ministry of Justice has acknowledged these concerns but has yet to take concrete steps to address the fallout.
As uncertainty continues, the London legal community is calling for urgent reforms to ensure the city remains a viable and attractive forum for class actions and complex litigation. Lawyers and stakeholders are anxiously awaiting developments that could shape the future of litigation funding in the UK.
