THIRD PARTY LITIGATION FUNDING AND ITS IMPACT ON CLASS ACTIONS – LESSONS FROM CANADA
Class actions are a well-established feature of the litigation landscape in North America and Australia. In many other jurisdictions around the world, mechanisms are being developed to permit class actions or other forms of collective litigation.
This is a fast-moving area with each jurisdiction developing its own approach, but there is a clear trend toward greater use of class actions and other forms of group litigation. In short, international companies are increasingly exposed to the risk of class actions or other collective litigation in areas such as securities litigation, competition, consumer claims and employment practices.
This trend coincides with a significant growth in the use of third party litigation funding. Traditionally, many legal systems have discouraged or prohibited the involvement of outside investors in litigation. Over time, and with recognition of the high cost of litigation, the use of third party litigation funding has grown – with Australia as an early adopter – and there are now many litigation funders in the market that have considerable resources at their disposal and a clear track record of investment in litigation.
The confluence of these two trends is not merely coincidental. Class actions and other forms of collective litigation are an obvious destination for third party litigation funding – the cases are expensive to litigate, and the potential recovery is large. In addition, where cases are brought by individual claimants or qualified litigation representatives there may be a mismatch between the interest of any individual litigant and the total cost of complex litigation.
Jul-Sep 2023 issue
McCarthy Tétrault LLP