Time for CLAFs?

The Government should bring forward proposals for a Contingent Legal Aid Fund (CLAF), a Bar Council-commissioned report has said.

Economic consultants Europe Economics, which conducted the report, found that the concept has merit and should be seen as one of a number of potential funders of civil litigation.

A CLAF is a third party litigation funder, which can be run on a not-for-profit or commercial basis. The administrators of a CLAF fund meritorious claims by individuals or businesses otherwise unable to take the risk, and feed a proportion of any winnings back into the fund.
The report concludes that the financial viability of any CLAF can only be assessed once the ‘Jackson’ reforms to conditional fee agreements have had time to work in practice. Therefore the government should take steps towards enabling the creation of CLAFs but not rely on them to plug the gap of legal aid cuts.

It finds that CLAFs could, in principle, fund clinical negligence cases but there is too little data available to form a view. There are likely to be several CLAFs rather than just one, and they are likely to be “small scale and specialist in nature, and somewhat experimental”. They need not fund the entire case and could be used for disbursements only. There is no reason, in principle, it says, why a CLAF should not take more than 25 per cent of damages.

It concludes that the government should help by confirming that not-for-profit CLAFs will not face adverse costs orders, and that clients and defendants will not be able to raise pleas based on maintenance and champerty.

The passage through Parliament of the controversial Legal Aid, Sentencing and Punishment of Offenders Bill has intensified debate on litigation funding amid fears many people will be left without access to justice.

Former chairman of the Bar, Peter Lodder QC said: “Faced with continuing legal aid cuts, we cannot turn back the clock to the days when only the very wealthy could afford to litigate to obtain redress for harm caused by others’ wrongdoings; a CLAF can probably help.

“We invite the government to take this report seriously, support the concept and provide necessary encouragement for its promoters.”
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