Litigants in the United Kingdom are subject to the “loser pays” rule. Under this rule, the losing party in litigation pays not only its own legal costs but also the costs of the winning party. To date, this has been a major hurdle in bringing civil antitrust claims and, in particular, class actions. A recent development in the possible funding of antitrust claims may change this. Class action plaintiffs in the United Kingdom may now be able to insure themselves against the litigation risk of losing in antitrust cases, which is likely to encourage class action antitrust cases to be brought in the United Kingdom.
In recent days, a UK insurer, FirstAssist Legal Protection, announced that it had agreed with a well-known US-based plaintiff’s firm to issue a policy to indemnify plaintiffs from risk of an unsuccessful claim. According to the policy, named Cartel Key™, FirstAssist will indemnify claimants against the legal costs of losing an antitrust case. In other words, if plaintiffs are unsuccessful, FirstAssist will pay defendants’ legal costs as well as plaintiffs’ legal costs. An insurance premium will apply if plaintiffs are successful, and this will be paid by the defendants consistent with the “loser pays” rule. Notably, the policy is non-exclusive, meaning that FirstAssist may insure plaintiffs represented by other firms.
Insurance in litigation and third party funding of litigation is not a new concept in the United Kingdom or elsewhere. Through these mechanisms, companies may obtain insurance to limit their own legal costs in the event of litigation, or third parties, such as banks or hedge funds, may fund litigation in exchange for a portion of a resulting damages award.
In the case of Cartel Key™, however, the objective is to indemnify claimants from virtually any risk associated with bringing a class action lawsuit in the “loser pays” environment. Plaintiffs firms assert that the prospect of paying defendants’ legal costs is the most significant deterrent of litigation, even meritorious lawsuits. By reducing plaintiffs’ risk profile and creating a nearly zero risk for plaintiffs—similar to the situation in the United States—class actions in the United Kingdom can be expected to increase.
While the success of Cartel Key™ or similar arrangements remains to be seen, the US plaintiff’s firm that secured this insurance package has already indicated that it has secured this policy for a specific case and is also evaluating cases in the air cargo and marine hose sectors. Other insurers and plaintiffs firms may likewise follow suit given the non-exclusivity of these insurance arrangements.