A new piece of legislation, effective 27th April 2020, has paved the way to greater choice for companies in the way they finance litigation in Scotland, bringing a much needed change to align the law with commercial reality.
The Civil Litigation (Expenses and Group Proceedings) (Scotland) Act 2018 opens up a range of new funding options to clients looking to raise (or defend) actions in Scotland.
Over the course of the last decade, the law has been updated to provide parties with a greater flexibility with how disputes are funded and costs are managed. The market has seen the development of new and increasingly sophisticated forms of alternative pricing arrangements, third party funding models and insurance products. "This new legislation goes much further and aligns Scottish law with the position in England, where litigation funding has been a massive success story," says Simon Catto, head of Dispute Resolution in Scotland at Addleshaw Goddard.
The new legislation will provide increased access to justice. At one end of the scale, the reforms are designed to help people get legal representation where they otherwise can't afford it (e.g. people who suffer personal injury or some other harm as a result of negligence). At the other end, it will give businesses the chance to find innovative ways to fund litigation whilst protecting their balance sheet.
Simon Catto says: "One of the most important points to consider at the outset of a dispute is cost. The costs of taking legal action always need to be weighed up against the benefits. During the course of any dispute, costs pressures can create tactical advantages and disadvantages for parties. In some cases, cost pressures can prevent parties from taking action in the first place. This legislation allows our clients to allocate risk effectively to suit their business needs.
"Our product Control which has been active in England for the past 10 years has enabled us to adopt a well-developed and sophisticated approach to risk sharing with clients, allied with a strong network of funders, brokers and insurers that allow us to provide imaginative yet practical solutions. We can now bring this expertise to our Scottish client base."
The recent legislation follows on from the recent case of A & E Investments where a "success fee" was held to be unenforceable because it was calculated by reference to the sum recovered in damages. The Court was bound to make this decision but it also pointed to a lack of flexibility in the law. The key point is that the 2018 Act now means that legal fees can be paid out of monetary awards paid to successful parties.
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Notes to editors
- Addleshaw Goddard has led the way in England with many of the most radical reforms relating to litigation financing for the past 10 years.
- The award winning "Control" Litigation Financing product is now available to help clients in Scotland.