Solicitors have ?duty? to disclose funding options
PUBLISHED May 9, 2012
Thursday 10 May 2012 by John Hyde
A leading US litigation funder has claimed lawyers have a 'legal and ethical duty' to tell clients about alternative funding options.
Selvyn Seidel, co-founder and chairman of Fulbrook Management, told the Gazette that there is still a lack of information about the industry, despite most of his group's work coming from solicitors' enquiries. According to the new SRA Handbook and outcomes-focused regulation, solicitors must provide clients with the information they need to make informed decisions.
Seidel said this responsibility must include explaining all available funding options. 'There will be a watershed jump forward here when more people recognise that there is what I call a "duty to know, a duty to tell" within the legal profession concerning third-party funding,' he said.
Working with a panel of City firms, Fulbrook has invested in 20 cases in the UK this year, valued at between £1m and £10m.
Meanwhile, litigation funder Vannin Capital, with backing from private equity firm Bramden Investments, has increased its stake in the market from £25m to £100m. The group launched in June 2011 and now plans to expand its existing case portfolio in the UK.
Also this week, Harbour Litigation Funding announced a new fund of £120m to invest in more than 50 UK-based commercial legal actions and arbitrations.
Harbour said it has reviewed more than 1,200 cases since 2002 and funded more than 100, making it one of the biggest investors in litigation in the UK during that time. The funder reviews 25 new cases every month and last year invested £40m in litigation claims worth more than £1bn.
The new wave of investment comes amid questions over the ethics of investing in litigation and the future of a voluntary code drawn up by the Civil Justice Council last year.
Seidel said the code was just the beginning and 'far from perfect', having paid no direct attention to international disputes and failing to draw a detailed line between commercial and consumer funding.
'Is a voluntary code going to be enough? I doubt it,' he said. 'Legislation is, in my view, eventually and over time, going to be important and will come into effect in various areas.'