In 2015 the UK introduced an opt-out collective action regime in competition law. The first cases in the Competition Appeal Tribunal have demonstrated that external litigation funding through lawyers and third-party litigation funders is essential for the certification of opt-out actions. However, when designing the opt-out regime the issue of how to pay funders has been overlooked. Only section 47C(6) Competition Act 1998 mentions that the class representative can recover costs and fees, including the funder’s success fees, from damages that are left over after attempts have been made to distribute the money to the class members. The issue is that this provision is wrongly understood to be the only way to reimburse funders. We argue that this interpretation is highly problematic as it encourages funders not to support cases where the distribution and, thus, compensation for the class is effective. If most of the award is paid out, the funder would not be able to recover their success fees and some of the costs. The result is that cases with good damages distribution models, which should be encouraged, are the cases which are disincentivised. We demonstrate that no restriction concerning the recovery of funders’ costs and fees was intended, and that the CAT has the power to award those costs and fees before damages are distributed to the class.
|Journal||Civil Justice Quarterly|
|Publication status||Accepted/In press - 8 Jul 2022|
- Competition law
- Opt-out collective actions
- private enforcement
- Litigation funding