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Report Highlights ‘Substantial Benefits’ of Litigation Funding for Consumer Justice

By Tom Webster |

The following was contributed by Tom Webster, Chief Commercial Officer for Sentry Funding.

Litigation funding provides ‘substantial benefits’ to claimant organisations, and robust funding mechanisms are ‘essential’ to secure justice for consumers, an authoritative report found last month.

The report, Justice Unchained, by European consumer organisation BEUC, also found many of the common criticisms of litigation funding were not backed up by evidence.

The study found that consumer organisations across Europe face significant financial challenges to starting collective redress actions. It noted that initiating a collective action is ‘complex, risky, and expensive’, often involving lengthy proceedings that need significant resources.

The report said: ‘Without sufficient funding, important cases will remain unaddressed and risk making the Representative Actions Directive (RAD)2 an empty shell’.

BEUC said that as public funding, membership fees and donations were often insufficient or unavailable, litigation funding had emerged ‘as a solution to bridge a funding gap’. Benefits for the claimant included access to necessary resources, risk transfer, and ‘a more equal playing field between consumer organisations and powerful defendants’, it said.

The report added that frequent criticisms of litigation funding, such as ‘the risk of frivolous litigation, undue influence by funders, or targeting competitors’ were ‘not well-substantiated’, and ‘insufficiently evidenced by specific cases’.

According to the report, the potential risks of litigation funding in the context of collective redress are already addressed by the Representative Actions Directive, which requires member states to establish a framework that includes procedures to prevent conflicts of interest and undue influence, with judicial oversight to ensure compliance.

The report found that additional regulation of litigation funding at EU level should therefore only be considered if it is necessary. It said: ‘Two-thirds of EU Member States have opted not to regulate [litigation funding] beyond the RAD’s requirements, finding these safeguards sufficient to govern [litigation funding] effectively for collective redress actions. Besides, [litigation funding] can be managed through judicial oversight, as is the case in several Member States with a longer history of using [it]’.

The BEUC report suggested that a set of ‘best practices’, jointly established and agreed by funders, claimant organisations and others, may provide for ‘a balanced solution, ensuring [litigation funding] remains viable while promoting fairness and transparency.’

It said such best practice could encompass transparency over the funder’s sources of capital; full decision-making autonomy for the consumer organisation and its legal counsel; clear agreements on all expenses covered by the funder; clearly defined funder’s remuneration; assurance of the funder’s financial adequacy to meet obligations; strict compliance with transparency requirements set by the law; effective detection and disclosure of any conflicts of interest; well-defined conditions for termination of the funding; and a robust dispute resolution mechanism.

About the author

Tom Webster

Tom Webster

Tom is the Chief Commercial Officer for Sentry Funding

Commercial

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Omni Bridgeway Backs Australian Class Action Targeting Johnson & Johnson

By Harry Moran |

A class action was recently filed in the Federal Court of Australia, targeting Johnson & Johnson over allegations that a number of its oral cold and flu medications are ineffective when taken orally. The claim covers 20 separate products sold by Johnson & Johnson across three brands of medication: Codral, Sudafed, and Benadryl.

An article in Lawyers Weekly covers the class action being brought by JGA Saddler, with funding for the case provided by Omni Bridgeway. The pharmaceutical giant is accused of falsely marketing and selling these products as effective treatments, with the claim seeking to represent any Australian customer who has bought one of these products since 2005.

Rebecca Jancauskas, director at JGA Saddler, stated that “Johnson & Johnson has manufactured and marketed a medication that decades of evidence have shown doesn’t work as claimed.” She also emphasised the importance of the claim in seeking compensation by saying, “customers should be able to confidently buy medicines that work as advertised and when they don’t, the company involved should be held accountable.”

Niall Watson-Dunne, investment manager at Omni Bridgeway, said that “for around 19 years, Australians have been sold cold and flu products to relieve their symptoms, despite studies and scientific evidence showing their key ingredient phenylephrine is ineffective when taken orally.”

More information about the class action can be found on Omni Bridgeway’s website.

Qanlex Refines its Latin America Strategy

By Harry Moran |

Qanlex is one of the few litigation funders focused on providing third-party financing in Latin America, with a dedicated presence in the region. The funder leverages a sector-specific strategy for targeting lucrative case types.

Speaking with América Economía, Qanlex’s general counsel for Latin America, Juliana Giorgi, emphasised that in order to gain a foothold in the competitive litigation funding market, the firm has leveraged “the development of technology.” Giorgi goes on to explain that its in-house software “searches for cases in judicial databases that might interest us due to the value of the claim or the nature of the process”, allowing Qanlex to find suitable claims to finance in the different countries it operates in.

Beyond the use of technology to refine its strategies, Qanlex has also chosen to focus on specific sectors that generate valuable disputes in Latin America. Whilst the construction sector has been a particular area of interest, Qanlex has also found opportunities for niche areas within different jurisdictions. As Giorgi explains: “In Ecuador we have several energy cases that include thermoelectric plants; in Costa Rica, cases of tourist real estate development; in Colombia, oil and energy cases."

Regardless of the sector, Gorgi acknowledges that Qanlex is “open to analyzing and financing any range of cases as long as they include a liquid asset transfer at the end of which the fund can take the remuneration.”

Emmerson PLC Obtains $11M in Funding for Moroccan Dispute

By John Freund |

Emmerson PLC, the mining company focused on the development of the Khemisset potash project in Morocco, has secured $11 million in legal funding for its dispute against the Moroccan government.

As reported in Business Insider, Emmerson obtained the funding from an unnamed legal funder. The proceeds will be used to commence with arbitration proceedings, with white shoe law firm Boies Schiller Flexner LLP being appointed litigation counsel.

LFJ recently reported on Emmerson's search for litigation funding, including that it is pursuing an investment dispute over the government’s alleged breaches of a bilateral investment treaty (BIT) between Morocco and the United Kingdom. Emmerson is seeking to establish itself as a low-cost, high-margin supplier of potash on the African continent.

We will keep you updated as this story progresses.