by Maurice Power

Litigation Funding – The Fake News

Less than two years ago, the term “fake news” was not recognised by the majority of people. Although a tool used by governments and powerful individuals for centuries to spread disinformation, boost their support and quash dissenters, the term came to prominence in the US Presidential election of 2016, primarily as a means by which Donald Trump could dispel any negative story about his campaign.

With the rising growth, ease of access and power of social media “fake news” has never been easier to spread. Such is its acceptance in our vocabulary that the term was named 2017’s word of the year. According to BBC research, the term “fake news” has been used about two million times on Twitter in the first three weeks of 2018 and a Google News search throws up around five million results. Even the UK Government has an open inquiry, being run by the Digital, Culture, Media and Sport Committee, looking at the impact fake news has on public understanding of the world.

Although some fake news may be a deliberate attempt to mislead or misinform, many examples can purely be a simple misunderstanding or miscommunication of facts.

As Managing Director of a litigation funding business, I am acutely aware that the majority of consumers and commercial entities will not know about litigation funding or have need of such a service. But, when or if they find themselves contemplating litigation in the future, and begin to realise the financial exposure of such an action, what role will the presence of fake news or facts play on their decision making?

The first fact that any potential claimant will be presented with is that litigation is expensive. They may be able to mitigate some of the financial exposure by engaging their law firm on a Conditional Fee Agreement (CFA) or a Damages Based Agreement (DBA), or they may have the benefit of some before the event insurance (BTE), however they need to be aware that they may be exposed to adverse costs and will need to fund any other legal and case related costs not covered by the above.

Next they will be advised as to the merits of their case and the potential value of any judgment or settlement likely to be achieved. Finally there may be some reference to the potential defendant’s ability to pay any settlement.

Once in possession of these facts, the claimant can make an informed decision as to the level of financial risk they are willing to take to achieve the potential reward.

During this process, the claimant’s legal advisor should have made them aware of the various options available to them to help fund or reduce the financial risk of the proposed litigation. One of those options should be to explore the 3rd party litigation funding market for assistance. Depending on the knowledge and experience of the legal advisor, fake news may play a part in the claimant’s understanding of the benefits of engaging a litigation funder.

Typical examples of fake news relating to litigation funding, which may be innocently used or read, are:

“The claim is too small to interest a litigation funder.”

“The funder will want a large portion of any settlement as a fee.”

“The funder will want to control the claim.”

“Involving a funder will reduce the chances of an early settlement.”

“Don’t expect a quick decision from the funder”

As with any new or specialist service, misconceptions about litigation funding are common place. This does not mean that there is a deliberate attempt to spread fake news, simply a misunderstanding of the service available and the cost attached to that service.

To address the above examples, the facts are that many litigation funders will consider claims of various values.

Their fees will be representative of the risk attached to the case and mindful of the commercial interests of the claimant.

They will be a passive investor in the litigation.

A well-funded claimant is more likely to achieve an early settlement.

Many funders acknowledge the need for a speedy decision to allow the claimant to expedite the litigation.

By better informing the legal profession, creating easier access to information and by educating the wider market, litigation funders will hopefully minimise the negative impact of fake news on a claimant’s decision making process and support greater access to justice.