A bronze statue of Lady Justice holding scales is displayed indoors.
A new study shows that while America still leads the world in lawsuit costs, the United Kingdom is gaining thanks to changes that have caught the attention of third-party litigation funders.
The U.S. Chamber Institute for Legal Reform released its findings earlier this month, declaring the U.K. has one of the fastest-growing litigation environments in the world and that tort costs – the financial burdens placed on citizens by their civil justice system – are increasing faster than inflation.
ILR analyzed costs as a percentage of the gross domestic products of the U.S., the U.K., Germany, France, Italy, Spain, the Netherlands, Australia and Canada.
“The United Kingdom experienced the most rapid acceleration in tort costs, with growth far exceeding underlying economic trends,” the report says. “If trends continue, the U.K. will have the world’s most expensive tort system as a percentage of GDP after 2030.”
Corporate defendants have pointed to TPLF-funded fraud in the United States’ tort system and so-called “nuclear verdicts” to explain rising insurance costs that burden all Americans through higher premiums and costs on consumer products. Some states, like Florida and New York, have taken action to make sure the insurance markets there regain stability.
In the U.K., the Consumer Rights Act of 2015 shifted how the country’s courts traditionally handled class action cases. Introduced were opt-out collective actions heard by the Competition Appeal Tribunal, which allows claims to be brought on behalf of individuals without their active participation - resulting in the mass aggregation of claims.
By the end of 2024, competition class actions featured more than 655 million class members – nearly 10 per citizen. Last week, the U.K. Department for Business & Trade released findings from a “call for evidence” it issued last year, with some who responded citing “a rise in speculative or novel claims” and a low class certification threshold.
And once a class action is certified, some complain it is too difficult to defeat the claims in court or settle them. This led to a December 2024 judgment that rejected class action claims against a company offering landline telephone services, but the company – BT – only recovered £16 million of the £26 million it spent defending itself.
“The view expressed by these (business) respondents is that the regime is damaging the U.K. economy, citing delayed product launches, hundreds of millions spent, and growing skepticism of the U.K. as a reliable jurisdiction,” the Department for Business & Trade wrote.
Proponents of the system tout the access to justice it provides for citizens and warn against changing class certification standards. In addition, they say the system shouldn’t be confined to just competition claims because others – consumer and environmental law and data protection – have to be repackaged as competition claims.
All this litigation has attracted investors, with estimates putting the TPLF market’s size in the U.K. up to £4.5 billion. One highly publicized case showed that lawyers and funders walked away with 80% of a settlement.
“The interaction of these elements—the ability to aggregate claimants via the opt-out model, loose certification standards, and a thriving TPLF market with virtually no oversight—has materially increased litigation costs,” the ILR report says. “The U.K. framework increasingly replicates the economic incentives for litigation and exposure for businesses that are seen in the U.S., all contributing to the U.K.’s significant rise in tort costs over time.”
Though tort costs have outpaced inflation in the other European countries studied, none have more than doubled like the U.K.’s has since 2014. Tort costs reflect 1.22% of the country’s GDP, while America’s figure as of 2023 was 2.15%.
“These findings should serve as a call to action for British and European policymakers,” said Stephen Waguespack, President of the ILR. “This data makes it clear the time for lawmakers in the UK and across the EU to act is now, before it is too late.”
