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Litigation funding and the public sector in Scotland

How could the public sector be impacted by easier access to litigation funding in Scotland? Jenny Dickson explains.

Litigation has become more readily accessible in Scotland in recent years - specifically when it comes to environmental cases - thanks to funding becoming easier to obtain and the growing trend of using litigation to raise political issues. This means that individuals and charities are beginning to use litigation more often as a means to challenge decisions made by public bodies. As the potential for increased litigation heightens, how can public sector organisations prepare?

One of the main barriers to litigation is funding it. Charities and individuals often fear financial burden when it comes to litigation, specifically when it comes to environmental cases as they often do not qualify for legal aid, so this is where a PEO (Protective Expenses Order) comes into play. A PEO protects a party from the cost of legal proceedings by either capping their potential liability for adverse costs or relieving them of any liability, enabling cases of general public interest to be advanced more easily.  

One example of a PEO being used was when environmental charity, Trees For Life, challenged issuing licences to kill beavers. The charity initially raised money for its judicial review through crowdfunding and built up a fund of £60,000, but the potential adverse costs it could need to cover if unsuccessful were around £200,000. Because the charity successfully argued that exposure to the other side's costs would be objectively unreasonable and prohibitively expensive, it obtained a PEO.

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One criterion considered is whether it is just and reasonable to grant the PEO, considering the financial resource of parties. In another example, Mr Keatings raised a court action to seek declarator that the Scottish Parliament can legislate for a second independence referendum. He sought a PEO. Although Mr Keatings was a man of modest means, he had access to considerable potential funding through his social media account and ability to crowdfund. Therefore, the court was not satisfied that Mr Keatings would discontinue proceedings if the PEO was not granted and considered the possibility that there would be a further round of crowdfunding from him to enable the court action to proceed and so the application was refused.

Crowdfunding litigation against public bodies is becoming increasingly popular in Scotland, with donors attracted by a shared interest in the outcome. This is largely because it allows litigants to fund their own legal expenses, as well as potential adverse costs, and can be raised all at once or in stages. If ultimately successful in the litigation, they may recover costs from the other party, in which case a crowdfunding arrangement would normally stipulate that those costs are not to be returned to each of the individual donors, so the litigant may have a financial interest in the case.

However, litigants using crowdfunding need to take care to ensure the terms on which they set up the arrangement are suited to their needs. Equally, public bodies should consider those same terms to ensure they are prepared and understand any implications of the funding of the litigation itself, including on arguments for supplementary financial support through a PEO.

We live in an era where litigation is used both to challenge decisions of public bodies and to drive political agendas. The courts play a vital role in ensuring that decisions can be challenged, but it is expensive and can often be difficult for parties to pursue their cases.

The Keatings case provided some guidance on how the court would apply the common law test for PEOs, and on the potential interaction between crowdfunding and PEOs. The rising popularity of these funding options may see new types of legal challenge to public bodies, so they should ensure that they are well versed on both types of funding. 

With these now easily-accessible funding options, many more potential litigants will raise cases against public bodies moving forward, and it's essential that public bodies understand the funding options available to litigants and what factors the courts will take into account when considering them.  

Jenny Dickson is Chair and Head of the Public Sector team at Morton Fraser.

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