Striking a Balance: The Emerging Wave of Litigation Funding against Corporates and the Need for Regulation

July 3, 2023 - Reading Time: 4 minutes - By Brian Otieno

Transformative jurisprudence in the early parts of the 20th century saw the emergence of the concept of public interest litigation (PIL). With increased human rights abuses by governments and multinational entities, there was a clamour for a model of pursuing justice for the common good as opposed to private interests. Consequently, public interest litigation became increasingly popular and has over time been appreciated globally. Succinctly put, PIL connotes the litigation model where the public interest is prioritised over and above all other underlying interests, more so with an aim to ensure the realisation of social and collective justice. In this model, courts have tended to disregard the constraints that come with the adversarial model of litigation.

Conscious citizens and organisations, with bona fide intentions, rely on the PIL model to approach courts for the interest of the public, for a disadvantaged or underprivileged segment of the society and not for any private, vested, special or group interest.  A possible injury that would result in a public interest suit becomes apparent when some constitutional or legal right, privilege or benefit is affected or where a constitutional or legal duty or obligation has not been performed as anticipated in law. Essentially PIL becomes a necessity when the protection that comes with the law and its enforcement is unavailable to the public or a segment of it, largely due to ignorance, poverty, fear, or lack of organised endeavour.

A Strong Settlement? Lifting the Veil

Amidst the nobility of PIL, it remains gullible to abuse and misapplication. A recent trend is emerging where NGOs, activists, social and religious organisations, trade and labour unions and other social welfare groups are launching suits under the guise of PIL while they are clothed in the garb of private interests. While courts have univocally and unequivocally cited such disingenuous behaviour by practitioners, the same is growing two-fold. As a result of the growth and possible instances of malice and mischief, litigations have hit leading corporates and multinationals. Suffice it to say, they are damned if they comply and damned if they do not comply.

“This was a strong settlement . . . it was quite a thrill when we settled,” that was the statement of Rebecca Gilsenan, a lawyer at Maurice Blackburn who represented the farmers in the lawsuit against PTTEP Australasia. The gist of this suit draws back to 2009 when huge volumes of oil spilt into the Timor Sea from a well off the coast of Western Australia. The two-and-a-half-month-long leak caused catastrophic damage to marine wildlife and upended the livelihoods of thousands of Indonesian farmers whose seaweed crops were destroyed.

Upon settlement, over 15,000 Indonesian farmers who had brought a class action suit against PTTEP Australasia, were cumulatively paid A$192.5 million, equivalent to £ 102 million, in compensation without admitting liability. Behind the settlement farce, is a company that funded the litigation. Harbour Litigation Funding, a UK-based firm that provides financing for complex lawsuits in return for a share of the proceeds, spent more than £17 million on the case, a budget that included money for a boat and the off-road motorbikes needed to reach farmers in remote locations and recruit them to the action. Upon settlement, Harbour took £43 million, or just over two-fifths, of the award.

Important to note is that companies are now being faced with increased risks not only from regulators but also from other market players. With the right of access to information, disclosures are now available to all including competitors, and this has prompted activists to become shareholders in competing companies to challenge what they deem as a form of dominance.

Ambulance-Chasing? The Increased Wave of Third-Party Litigation Funding

Third-party litigation funding continues to gain momentum under the guise of (Public Interest Litigation) PIL, but the increase in that wave means that there is more to it than meets the eye. It indeed remains counterintuitive that non-benefit organisations are now probing more and more into the litigation space to gain profits, which ideally defeats the purpose of these organizations as well as the gist of PIL.

Precipitated by the growing interest in suits against leading corporates and multinationals, legal fights are now turning into fronts for business opportunities where professional litigation funders are now thriving. Investors from all fronts, including pension funds and family enterprises, are now taking advantage of the gaps in this space to fund claims against multinationals and corporates, as a way of making profits from these claims.

Funders of litigation are undoubtedly quick to find loopholes, exploit precarious situations, and make them avenues for quick profit making, largely disregarding the ethical components of cases, more so when relying on PIL. It is in this regard that something needs to be done to ensure the good intentions behind the emergence of PIL are not eroded.

Conclusion

The line between public and self-serving interests becomes increasingly blurred, particularly in light of the growing wave of litigation funding. There are concerns that motives behind some of these claims are no longer transparent and profit-seeking funders, operating under the garb of PIL, are now cherry-picking cases, either for vendetta, witch-hunt or the potential of payout and victory, at the behest of the social impact and societal gain.

Consequently, it is time regulators find a way of regulating this front before it explodes into a crisis. Possibly, litigation funding entities will raise opposition saying that regulation amounts to Strategic Lawsuits Against Public Participation (SLAPP), described as a form of retaliatory intervention intended to deter freedom of expression on matters of public interest, but it remains greatly beneficial even to them, that the space is regulated to weed out unscrupulous and malicious players. 

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