Insights from our webinar hosted in collaboration with TL4 Competition Community to discuss the exceptional growth rate of the litigation market and how to scale effectively.
The mass action space in the litigation market is maturing at a rapid pace in the UK. With 10x growth in cases, claimants, settlement values and funding widely predicted in the coming 24 months, what does the industry need to do to get match fit?
The challenges and potential solutions were debated in a webinar hosted by TL4 Competition on 22 April, and chaired by Claire Van der Zant, Director of Strategic Partnerships, Shieldpay.
Panel:
Andrew Hill, Partner, Fox Williams
Rosie Murray, Litigation Solicitor and Funding Specialist
Clare Ducksbury, Founder & CEO, Case Pilots
Key themes covered:
2. What challenges do we still need to lean into?
3. Horizon scanning and future roadmaps for scale
Re-watch the conversation on our YouTube channel
Introduction
Across the collective redress market, unprecedented growth is being seen across the number of cases, cohorts of claimants, the value of settlements and the funding that underpins this era of the mega-group action.
In 2022, CMS’s Class Action Report stated that 110 new claims were filed in the UK and Europe with 171m claimants were actively involved in cases, in 2023 121 new claims were filed and 340m claimants were actively involved in cases. The world's largest litigation cases involve millions of claimants and billions in estimated settlements so far, with more to come. To date the largest class actions are the US tobacco lawsuit with a record-breaking settlement of $206 billion, paid by major tobacco companies to 46 US states and $20bn for the BP Gulf of Mexico oil spill.
Clare Ducksbury: We need to champion technology-led solutions for class and group actions, there is too much reliance on excel spreadsheets and emails to manage claims and they just don’t cut it. Managing claimants and cases that are exponentially growing in size requires dedicated software that is designed with the twists and turns of multi-party litigation in mind.
Excel spreadsheets are still widely used in collective claims despite their various challenges – no audit trail, version control issues and occasionally just crashing. They are simply not fit for purpose. Law firms are moving to technology that provides security, data protection and a robust way of managing information. Any firm managing large claims needs a ‘central source of truth’ that can be relied upon.
Teams of paralegals working on basic programmes simply won’t be able to cope with the onslaught of high-volume cases expected. If you always do what you’ve always done, then you’ll always get what you’ve always got. In this case, data challenges and time-consuming issues.
Andrew Hill: Whilst commercial and securities cases are often smaller in terms of claimant numbers, there is considerable growth coming in retail securities and institutional investor cases. To prepare for these larger, more complex cases, everyone needs to move forward with technology. In terms of practical steps, we’ve been scaling up our team, investing in order to meet the growing need and to be able to take a portfolio approach across cases.
Rosie Murray: Bigger cases will naturally mean bigger funding requirements. The size of the investments required to meet these bigger budgets provides challenges as does the administration of larger investor pools and funds. Those managing claims are having to find increasingly creative ways to fund them. Co-funding is one option. Some have concerns about this adding an extra layer of complexity but actually there are many examples of successful co-funding.
Increasingly we are seeing insurance products coming to the litigation funding market, removing risk from funding those larger deals but also of course adding cost. In terms of accessing capital, litigation funding has seen some challenging conditions in recent times but there is still a healthy, competitive market with a variety of evolving solutions.
Clare Ducksbury: Part of the rich challenge of building technology is the pace of change. We have a number of priorities on our roadmap this year in anticipation of continued growth and scaling for the litigation sector. Our in-house development team is looking at the opportunities presented by AI for future needs. Whilst many have reservations about AI, automation is already in play with voice recognition technology performing a key role in mass litigation.
We’ll continue to analyse the use and robustness of AI tools. In a mass claims environment background automation can help to provide a consistent, accurate service that feels individual to huge numbers of claimants. Efficient and seamless processes need to become standard within our systems otherwise we won’t be able to stay ahead as the industry balloons.
We’re also working through the data implications of third-party cookies being phased out by Google and the opportunities for using first and second-party cookies instead.
Claire Van der Zant: Innovation and technology are key to overcoming the challenges ahead. We often think of technology being able to deliver 80% of the challenge, however the real innovation is how you can digitise the final 20% of the challenge. This can actually have a bigger impact than just automating the straightforward processes. If we can lean in and take a new approach to solve the unhappy path journeys, we should see substantial wins for firms as these are the challenges that take the most human power to solve.
Zooming into verification as an example, automation can alleviate the management of referrals, which is crucial as verification referrals can compromise the speed and accuracy of the entire case. International or more sophisticated claimants bring a whole new level of complexity for verification. For these types of claimant cohorts, innovation efforts have to aim to be achieve more than just the automation of a simple process but consider complex verification as the industry scales.
Andrew Hill: Looking more closely at the judiciary and larger cases leveraging Section 19.8 of the Civil Procedure Rules, which allows claims to be brought on behalf of all those who have the “same interest” in the claim, we need the courts to consider how they scale operations to handle joint claims better. This should mean the courts taking a much more hands on approach and also taking good practice into the commercial space.
We’ve long believed that the CPR 19.8 approach feels appropriate to shareholder cases. Although some judges appear to have concerns about 19.8 impacting their ability to manage cases, the direction of travel is widely in favour of 19.8, with more people likely to start getting on board with the approach.
The umbrella proceedings adopted by the CAT (the UK’s specialist Competition Appeal Tribunal) could clearly have beneficial application to the courts in other cases.
We need to keep moving forward with making case management as efficient as possible. The UK has historically led the way, but Europe is catching up. If we want London to remain a key hub of large-scale litigation we need to evolve at pace.
Rosie Murray: Litigation funding is still a maturing concept within the broader investment market, and whilst it’s gaining steady growth year on year, the next big priority on the minds of the litigation funders is the pursuit of clarity on the criteria for large funding terms.
The CAT hasn’t yet provided clear guidance on funding terms. But recent cases such as PACAAR have implications for a new approach to funding collective action that need clarification. Duration risk is also an issue within litigation finance, we need to see the CAT and the High Court taking a proactive approach to group claimants and embracing more creative ways of funding cases.
Clare Ducksbury: The litigation market is often at the pointy end of technology and security failures and breaches – the Horizon scandal, data-breaches and broader privacy actions to name a few. It’s therefore essential that our practices are leading the way in advanced security when we’re handling data and distributing settlements for millions of claimants.
We are living in big data times and by constantly advocating the use of digital tools, we’re creating ever more electronic information. We are acutely aware of making sure our team is aware of the risks, that training is always up to date with fraud prevention software updated to stay ahead of the increasing cyber security threats.
Another way to ensure we are future proofed is to always work with robust partners who are SRA and GDPR compliant and FCA regulated. Our rigorous standards need to be reflected in anyone we work with to protect us and our clients.
Rosie Murray: Litigation funding is currently a self-regulated sector, permitted under statute, case law and public policy, but not yet governed regulation.
Increased guidance for litigation funders is coming and will be a good thing to maintain high standards across the industry but some concerns remain. There is clearly a large divergence in understanding of litigation funding in some areas of government and where a cap on funders profits is being discussed this could create issues.
A cap that doesn’t take into account the complexity of litigation funding could greatly impact access to justice if cases become commercially unviable. The litigation market could be left without the funding it needs to take cases forward. It’s important for those designing regulation to realise that litigation funders are not exploitative, in fact they must be competitive in order to win business.
Andrew Hill: The SRA recently announced a thematic review of client money in the wake of growing incidents concerning the handling of client funds. Axiom Ince was the final catalyst to launch the Consumer Protection Review which is being closely followed. Of course, firms that are well run are not as vulnerable to increased regulation or fines but it does elevate the issues around handling client money. In addition to the risks endemic in client accounts, it can simply be an incredibly time consuming and inefficient process to handle in-house for law firms.
One solution is a third-party managed account (TPMA) service offered by payments providers. This removes the risk and the regulatory burden as well as speeding up the process from something that can take years to a matter of days.
In summary
With the only certainty being more change to come in the UK litigation market, it is clear that administrators, law firms and funders all need to keep focused on evolving and implementing good practices and innovative solutions that will positively advance the industry and help us navigate the huge growth to come.
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