Community Spotlight: Jonas Rey, Partner, Athena Intelligence SA & Founder, Liti Capital SA

The Post Office Horizon scandal and the accompanying litigation brought both class actions and litigation funding into the spotlight for many in the wider public. A new survey on class actions shows that the public perception of third-party funding is shifting year-over-year, with a mixture of encouraging and concerning signs for litigation funders. 

Portland Communications has published a report titled ‘Reputation & Accountability – Class Actions, ESG and Values-Driven Litigation’, which provides insights into class action trends in the UK. Having surveyed 2,000 people, along with 540 ‘senior decision makers’ from UK businesses, the report also offers a view into the wider perception of class actions, law firms and the funders who back these claims.

The overall share of survey respondents who believed class actions lead to compensation for victims rose from 43% in 2023 to 57% in 2024, with a commensurate rise, 44% to 56%, in those who said that class actions hold large companies to account. However, despite this overall approval for the effectiveness of class actions, the more startling statistic may be that 81% of respondents believed that class actions mostly make money for funders and law firms.

Part of this distrust towards those supporting claimants may stem from a failure to properly educate the wider public, as 62% of those surveyed said that they had a ‘low’ understanding of how litigation funding works. Perhaps even more concerning for funders, is that those self-reporting this low understanding has risen from 49% in 2023. This lack of understanding is further cemented by the fact that 57% of respondents believed that unsuccessful class actions could still result in a financial loss for claimants.

However, the good news for litigation funders is that 67% of respondents would still prefer a situation where funders are taking a percentage compensation rather than paying the legal bills themselves. In support of this, there was also a notable decrease in the number of people who believed that all compensation should go to those affected, with a significant drop from 66% of respondents in 2023 to 46% this year.

The full report from Portland Communications can be accessed here.

An oft-repeated critique of litigation funding is that it may act as a vehicle for adversarial foreign actors to negatively impact U.S. national security or business interests. This is an argument that has primarily been leveled at policymakers to try and drive forward new regulations. However, an advisory opinion from a Department of Justice office shows that government bodies are already actively evolving their approach to foreign litigation funding.

An insights piece produced by law firm Morrison Foerster analyses an advisory opinion that was published by the DOJ’s Foreign Agents Registration Act (FARA) Unit. The opinion, which was issued on June 24, 2024, advising a U.S. law firm that it must register under FARA if it wished to pursue impact litigation as the claims were being funded by a foreign non-governmental organization. After comparing the opinion with public FARA registrations, the articles authors concluded that ‘the law firm that requested the opinion and ultimately registered, received funding from a private Australian NGO to pursue environmental-related litigation.’

Morrison Foerster’s detailed analysis shows that the opinion appeared to reshape certain aspects of FARA’s applicability to certain categories of foreign litigation funders, particularly as it relates to which situations would qualify for FARA’s legal and commercial exemptions from registration. 

Regarding the legal exemption, the opinion indicated that this does not apply if the funder is not party to the litigation or if the litigation aims to affect U.S. policy either. The authors suggest that ‘this would potentially create a registration obligation for any impact litigation or perhaps even any litigation that invokes policy arguments that is funded by a foreign entity, even when the foreign entity is a party to the litigation.

When it came to the commercial exemption, the advisory opinion seemed to only interpret the statutory language in isolation and did not consider FARA’s corresponding regulations. According to Morrison Foerster’s analysis, 28 C.F.R. § 5.304(c) of FARA’s regulations would make the commercial exemption available ‘for activities directly in furtherance of the commercial interests or other organizational objectives of a foreign principal’, as long as these commercial activities are not directed by, nor directly promote the interests, of a foreign government or party.

The advisory opinion written by Evan Turgeon, Chief, Foreign Agents Registration Act (FARA) Unit, can be read in full here.