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September 27, 2023

You Shall Not Pass! One (Confidentiality) Ring to Rule Them All?: Exploring Confidentiality in Collective Actions

When dealing with Competition Appeal Tribunal confidentiality rings, is it reasonable to exclude the funder, or does excluding them hinder effective case monitoring?

Jeremy Humm
Investment Manager

Times have moved on since maintenance and champerty were both crimes and torts (abolished as they were in the Criminal Law Act 1967 along with the lesser-known, but somewhat more dramatic offences of “challenging to fight” or “being a common barrator”), but there remains no scope for “wanton or officious intermeddling”[1] by funders in funded claims. Whilst funders will inevitably exercise some control over litigation (not least by holding the purse strings), if that control becomes excessive there is a real risk that the funding agreement becomes contrary to public policy, and therefore unenforceable.

The go-to authority in this area has for some time been the Commercial Court’s decision in Excalibur Ventures LLC v Texas Keystone Inc[2], in which the funder was found liable to pay the defendants’ costs of the action on an indemnity basis. In his costs judgment, Clarke LJ rightly observed that the aim of the litigation funding industry is “not to finance hopeless cases but those with strong merits”.[3] He went on to highlight the importance of funders and their advisors taking “rigorous steps short of champerty, i.e. behaviour likely to interfere with the due administration of justice - particularly in the form of rigorous analysis of law, facts and witnesses, consideration of proportionality and review at appropriate intervals”.[4]

Whilst the boundaries are therefore understood by litigation funders, there is a potential fly in the ointment when it comes to collective actions in the Competition Appeal Tribunal (CAT), brought about by the application of Rule 101 of the CAT Rules 2015, which provides a mechanism for confidential documents to be disclosed into a confidentiality ring. In practice, this often means an “outer” and an “inner” ring is established by order of the Tribunal to protect different categories of commercially sensitive documents (which usually include the litigation funding agreement (LFA) and after-the-event insurance policy). Membership of the“outer” ring often comprises the class representative, respective legal teams, certain representatives of the defendant and any experts instructed in the claim. The“inner” ring, reserved for the most sensitive documents, can be even more restrictive (sometimes even the class representative is excluded from the inner ring – this point arose recently in Coll v Google[5], although ultimately no inner ring was established). The funder is not usually a member of either.

The obvious question that arises is whether it is reasonable for the party financing the proceedings to be excluded from the confidentiality ring (the outer ring, if more than one is in place). It might be argued that the funder does not need to have sight of all (or perhaps any!) documents disclosed in order to understand how a claim is progressing, and that the legal team is well equipped to provide ongoing, overarching strategic and merits advice as the case evolves without breaching confidentiality obligations. But is that sufficient for the funder to comply with its duties to its investors (and the court, cf. Excalibur) by monitoring its funded cases? What would happen in the (admittedly, relatively unlikely) event that a document disclosed into a confidentiality ring was so probative as to shift the class representative’s strategy to the extent that further funding was required? How can a funder address a request for additional funding without the ability to carry out full due diligence? More importantly, shouldn’t the funder have the ability to review all available material in the context of any settlement discussions that might arise (subject of course to the terms of the LFA)?

From a confidentiality perspective, there does not seem to be a strong argument in favour of excluding the funder. In addition to the stringent obligations imposed by the confidentiality ring order itself, members of the Association of Litigation Funders (ALF) are otherwise obliged to observe the confidentiality of all information and documentation relating to a dispute to the extent that the law permits, subject to the terms of any confidentiality or non-disclosure agreement agreed between the funder and the funded party.[6] It is simply not in the funder’s interests to breach these obligations.

To date, this does not appear to be an issue that the Tribunal has had to grapple with. There may be something to be said for a funder keeping its powder dry until a competition claim gets the green light following a Collective Proceedings Order hearing. Perhaps the answer is simply that this is an ever-evolving regime, and there is no bar to the funder being added to a confidentiality ring as the case progresses, if the facts require it. As Roth J commented in his 2020 Foundem judgment, “In my view, the important points to emerge from the authorities are that: (i) such arrangements are exceptional; (ii) they must be limited to the narrowest extent possible; and (iii) they require careful scrutiny by the court to ensure that there is no resulting unfairness”.[7] Any confidentiality regime should enable responsible funders to adequately assess the risks of the cases they are funding on an ongoing basis.  This is not only in the interests of investors; if there is evidence within a confidentiality ring that could be capable of disposing of a case early, it should also be welcomed by defendants and the courts.

The hope (of this funder!) is that a reasonable balance will be struck, and the interests of the funder will not be unnecessarily marginalised.  


[1] British Cash and Parcel Conveyors Ltd v Lamson Store Service Co Ltd [1908] 1 KB1006

[2] [2013]EWHC 2767 (Comm)

[3] [2014]EWHC 3436 (Comm) at paragraph 129

[4] Ibid.

[5] 1408/7/7/21

[6] ALF Code of Conduct, paragraph 7.

[7] Infederation Limited v Google [2020] EWHC 657 (Ch), at paragraph 42.

To download the full issue, click here.

This article was first published in ThoughtLeaders4 Competition Magazine.

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