With the marked increase in group litigation and rapid development of the litigation funding industry, the Competition Appeal Tribunal is consistently seeing novel claims. New theories of dominance are appearing, with what actually constitutes a dominant position widening. And the type of claim presented to the tribunal is expanding, with an increasing number of ESG claims filed.
As the only court in the jurisdiction to allow for opt-out group litigation, the CAT is the only means by which North American style class actions can be brought. Supporters of the expansion of the CAT’s domain and these new claims see it as a necessary means of consumer redress. The system is seen as one that provides access to justice for consumers, and a way of holding major corporates to account.
Critics, however, argue that some in the market – on both the claimant firm and litigation funding side alike – are going too far in formulating novel claims. They argue that claims that wouldn’t be traditionally considered ‘competition’ claims are being artificially wrapped up , and inappropriately shoehorned into this forum. Some argue that the claims that are being brought are poorly formulated, and based on political motivations, rather than legal merit.
Those on both sides of the debate argue that the growth of the funding industry has allowed claims that wouldn’t have otherwise been heard to make their way to court. Supporters contend that this funding allows for important cases that are otherwise economically unviable to be heard, providing redress for consumers and holding corporates to account for their behaviour. On the other side, critics argue that the commercial motivations of the funders, and the returns they receive dramatically undermines the ‘good’ they are actually doing.
Everything is politics
On the advent of spurious claims, Damien Byrne Hill, former global disputes head at Herbert Smith Freehills, references unmeritorious claims brought by lawyers for purely financial reasons. ‘In the US, for example, claims tend to be law firms rather than funders, with contingency fee arrangements allowing firms to bring cases to make money out of settlements rather than to remedy losses,’ he explains.
ClientEarth v Shell is evidence of one such case, with a derivative action brought against Shell alleging a breach of the Companies Act 2006. The judge decided that ultimately, ClientEarth had not brought the case in good faith, and held that it was for the directors to decide how to promote the success of a company.
Shell denounced the attempt, commenting ‘the court has clearly found that ClientEarth’s claim is fundamentally false’, and deriding it as ‘utterly misconceived’. The case is now regularly referred to by critics as evidence of the ‘spurious’ claims being sought by claimant firms and funders.
Macfarlanes competition litigation partner Simon Day argues that the characterisation of a case as ‘spurious’ will always depend on the perspective of whoever is making such a claim. ‘There’s always a political angle,’ he says. ‘ClientEarth obviously thinks it’s doing good by trying to hold companies to account, trying to get them to hit targets adopted by governments in things like the Paris Agreement. Those cases are transparently political’.
‘It’s more plausible for a privately paid case to be run on poor merits than a funded case.’ Julian Chamberlayne, Stewarts
Others are more absolute in their dismissal of the ‘spurious claims’ arguments, including Milberg London partner Nicola Vinovrski. ‘This narrative that all claims made against huge corporations are necessarily spurious is quite convenient for corporate defendants. Where harm has been done, law firms and funders using available collective redress mechanisms facilitate consumers getting access to justice in relation to that harm.’
Vinovrski is one of many partners spoken to for this feature drawing attention the time devoted to due diligence undertaken by law firms and litigation funders alike ahead of commencing claims. The view echoes one taken by many, who view the attempts of defendant firms to undermine the basis of the claims as an easy form of defence.
While the popular criticism is that the advent of litigation funding has allowed for these unmeritorious claims, Stewarts cost and funding head Julian Chamberlayne disagrees, also stressing the due diligence undertaken by litigation funders. ‘Once in a while, rich individuals or companies are prepared to pay their lawyers to argue cases that aren’t particularly strong,’ he says. ‘It’s more plausible for a privately paid case to be run on poor merits than a funded case.’
Chamberlayne’s colleague, tax litigation head David Pickstone concurs. ‘It’s simply not possible to run unmeritorious claims,’ he argues. ‘Independent entities look at funders, insurers, and law firms, and every one of those bodies has a strong incentive in making sure claims are commercially viable.’
Checks and balances
On what can be done to prevent unmeritorious claims becoming rife, Byrne Hill says: ‘The question is what level of control should there be and how should that control be operated in order to ensure that the market is operating efficiently and allowing claims to be brought that ought to be brought without encouraging senseless litigation that would never go to trial and is just a way of securing a settlement? There are two factors that go to finding the right balance. One is regulation, which doesn’t exist. And the other is judicial control over the process, which does.’
Irrespective of an individual’s view on how often claimant firms and funders are attempting to bring poorly formulated claims, there is largely consensus that the veracity of courts in England and Wales means even if they are brought, they are unlikely to succeed. Tracey Dovaston at Pallas Partners sums up the checks and balances inherent in the certification of group claims that takes place in the jurisdiction. ‘There are always claims which may be spurious. But absolutely not all or even many claims are. In order to get funding you have to be able to show the merit of the claim. What you’ll find when they’re spurious is that they get thrown out at the early stages.’
Dovaston’s Pallas colleague Fiona Huntriss points to a further safeguard in the system that prevents spurious claims – namely the adverse costs regime that differentiates proceedings here from in North America. ‘England is a loser-pays jurisdiction, so there’s a built-in safeguard against spurious claims. I don’t think England is susceptible to a rise in spurious claims, due to adverse costs.’
While many interviewed acknowledged the flurry of novel claims to have appeared in recent years, and question the merits of them, most trust that the judiciary in England and Wales will prevent unmeritorious claims making their way through courts. As Michael Jacobs of Boies Schiller concludes: ‘There are lots of controls and balances in place to ensure claims aren’t completely rubbish and ill conceived.’