Crowdfunding – the future for justice?

Crowdfunding gives retail investors a chance to back projects close to their heart and it’s no surprise that early successes have been in consumer-facing sectors such as clean technology, the arts and wine and beer ventures. Now the emotional pull is being used to attract funds to social justice litigation and fill an increasingly large hole in the availability of public money for these cases.

CrowdJustice, a website that crowdfunds public interest cases, has just launched its first action in the UK High Court. Gilberto Torres, a Colombian trade unionist, alleges that BP subsidiary Ocensa employed paramilitaries to kidnap and torture him. Torres’ has lawyers acting for him on a no win, no fee basis and he hopes to raise money via CrowdJustice to pay for court fees, translation of documents and a Colombian legal expert.

It is a timely breakthrough for CrowdJustice as the UK government moves to scrap the Human Rights Act and continues to make swingeing cuts to legal aid but it is difficult to see who the platform aims to target and how it might be used as a model for a wider range of litigation.

Unlike traditional crowdfunding that offers investors rewards, shares or the chance to share in any profit, CrowdJustice states that it gives backers the chance to have an “impact on a specific issue or even contribute to changing the law.”

In other words, CrowdJustice operates like a charity.

“It will work best where a group of people want an issue resolved, for example in the Human Rights arena or for a community dealing with a planning application,” says Harry Spendlove, a solicitor in the commercial litigation department at London-based Stewarts Law.

But could crowdfunding provide an alternative model for third party litigation funding which has evolved into the mainstream and is generally viewed as a mature, professional and increasingly popular resource for commercial cases.

Litigation involves risk – not only the risk of winning or losing but. in the UK, the risk that the loser will be responsible for the winner’s costs. For this reason crowdfunding is unlikely to be appropriate for complex commercial cases without some form of compulsory regulation.

It is over a year since the Financial Conduct Authority implemented regulation for crowdfunding, both loan-based and investment-based, and it has been applauded for providing a simple authorisation and verification process.

However, the FCA clearly distinguishes between protecting the investor against the credit risk of the borrower, in loan-based crowdfunding, and managing the more complicated risk in investment-based crowdfunding where consumers buy debt securities or shares, often in start-up companies. In the latter, FCA rules require that investors must be sophisticated or high-net worth individuals, have received advice or are investing no more than 10% of their net assets.

Crowdfunding litigation, which isn’t covered in the FCA rules, is more akin to investment-based crowdfunding in complexity because of the risk of litigation, in particular the costs implications. The chances are that the FCA would require safeguards to ensure that an investor fully understood the risks and that only cases with a decent chance of success, straightforward issues and a clear budget analysis were taken on.

Even then the costs implications would require special considerations.

“There are models recently launched in the US, such as LexShares, that allow investors to invest in litigation but the US doesn’t have a ‘loser pays’ protocol,” says Mr. Spendlove.

One way around this would be for investors to put in more than their contribution to cover an adverse order or otherwise provide some pool of money for an after the event insurance policy, suggests Mr Spendlove.

Again, some form of oversight would be required to analyse costs risks adding another layer of complexity and perhaps even triggering a contingency funding arrangement, rather like a solicitor’s conditional fee agreement.

In these circumstances it may be too early to introduce a crowdfunding model into the current third party funding market that is markedly different to existing third party funders.

27 May 2015

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Sorry seems to be the hardest word

So the boss of Thomas Cook has finally said sorry to the parents of Christi and Bobby Sheppard, the children killed by a leaky boiler during their holiday in Corfu.

Whether this is a case of ‘too little, too late’ only time will tell.  The company claims their sales have not been impacted by the furore over how they have behaved since the tragedy and in particular around last week’s inquest. However the power of the consumer should not be underestimated, particularly when we know thousands have already criticised and called for a boycott of the company on social media.

Thomas Cook has experienced a media battering this week and not without cause. By all reports it has handled this issue like an automaton from the outset, primarily concerned about liability and the bottom line with no humanity shown to the family. Then responding clumsily and woodenly when faced with a public outcry.

This will no doubt become the case study PR gurus point to in future when they preach the 5 golden rules of a crisis:

  • Don’t let lawyers dictate the strategy. Admissions of responsibility and the financial cost of such should always be weighed against public and reputational considerations.
  • Always involve outside counsel to avoid the danger of group-think in decisions, words and deeds.
  • Don’t dance on a pin-head to avoid saying sorry by offering a multitude of platitudes instead. Sometimes only sorry will do.
  • Apologies made after a media pounding lack authenticity. Better done early on as a genuine gesture and by a spokeperson who can convey some sense of humility and emotion.
  • Take all stakeholders into account. The media are just one constituency but a dialogue with them should come after direct and personal communication with any victims and those involved.

Bell Yard’s observation is that you will be judged as much by how you handle a problem as on the problem itself.   Thomas Cook will now surely join the ranks of BP and RBS as masters in how to turn a crisis into an even bigger reputational disaster.

20 May 2015

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Do we need a British Bill of Rights?

“If the UK really wants to be its own boss it would have to formally withdraw from the ECHR” Marietta Cauchi, Senior Consultant

The Bill of Rights proposed by the new Conservative government is intended to replace the Human Rights Act introduced by the then Labour government in 1998. It is due to incorporate into UK legislation the rights contained in the original European Convention of Human Rights (ECHR) but without the body of law created by cases brought under the European Court of Human Rights (ECtHR) in Strasbourg over the years, some of which have caused particular political unease in the UK.

The idea is that judgments from Strasbourg will be advisory only and the UK’s Supreme Court will be the final arbiter. The architects of the Bill of Rights believe that, in this way, the UK Parliament will have control and won’t be answerable to “Europe”. But will it really achieve this through a Bill that can be interpreted by UK judges just as the ECHR has been interpreted by European judges?

It is impossible to be certain of how any new legislation might work until the government publishes detailed proposals and in particular reveals the extent of rights covered and how prescriptive the legislation will be. Indeed it is hard to imagine which of the convention rights the government could exclude if it is to be faithful to the basic principles of human rights.   Constitutional lawyers are already arguing the point.

The government has said that it has no intention of diluting the basic rights set out in the convention but argues with what it has referred to as the ‘warped, arbitrary, extension of those rights’ by Strasbourg. It says the UK Parliament ought to have the final say over British legislation.

Some critics of a proposed Bill of Rights argue that Parliament already has this power because even though the UK has promised, in signing the ECHR, to abide by decisions of the Court in accordance with international law, if it doesn’t want to keep that promise, nobody can force it to do so and to change UK law. –

In these circumstances, any new legislation may only serve to highlight tension between the UK Parliament and its own judiciary if the Supreme Court delivers judgments in human rights cases that the government considers undesirable.

If the UK really wants to be its own boss it would have to formally withdraw from the ECHR, something the Conservatives have, so far, ruled out. Withdrawal would prevent UK nationals from taking human rights’ complaints to Europe.  It would also have consequences, too convoluted to resolve, on the devolution settlements in Scotland, Wales and Northern Ireland which presuppose Britain’s membership of the Convention.

The Bill of Rights seems an unnecessary complication because it won’t prevent the subjugation of Britain to arbitrary ECtHR judgments – the alternative, withdrawal from the ECHR, is surely a step too far?

One thing is certain, the new Justice Minister, Michael Gove, and his euro-sceptic junior minister, Dominic Raab, have a challenging task ahead of them.

13 May 2015

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Did Ronan have it right?

Communicators lose credibility when the audience thinks of the messenger and not the message… All people want is natural honesty, alongside some realism

Ours is the art of communication so I am always intrigued why people say so much, so often, how they choose to say it and why to so little effect.  Perhaps it’s the proliferation of social media giving us all a platform that few of us truly use wisely.

Conversely, great communication is a gift to the senses – think Churchill (“we will fight on the beaches”), Kennedy (“ich bin ein Berliner”), Nye Bevan (“I stuffed their mouths with gold”) among many others.  Despite Bevan’s stammer he was, by all accounts, a natural orator.  Tony Blair had a talent for communicating too only regrettably, in this day and age, political speeches often appear formulaic, over-prepared and unnatural.

Watching Ed Miliband and David Cameron grasping for votes on the election trail and you could spot the coached language a mile off – Ed dropping his ‘t’s when talking to ‘ordinary people’ (Iike Russell Brand?), ‘Call Me Dave’ adding the odd obscenity, supposedly to inject passion into his campaign.

They both like to recount anecdotes from times spent with the likes of Harry in Huddersfield and Mary from Manchester to illustrate their understanding of the ordinary British voter. Yet none of it really rings true.  Instead it’s at the rare moment when you hear Miliband wishing he’d spent more time with his father or Cameron speaking of his personal experience with the NHS that they actually sound like they’re speaking from the heart, whether or not speechwriters have busily crafted their lines.  And that’s the trick – delivering in your tone of voice.

This week I read an article by singer Charlotte Church. She was defending her right to be heard campaigning on the streets bearing a placard denouncing the new Tory government (presumably for being elected).  She, along with any other individual, is entitled to have her views published though, given her celebrity status, she is likely to receive a bigger platform than most.  I applaud anyone who acts on their beliefs, not just speaks. Yet instead of subjecting her analysis to scrutiny, I found myself doubting she’d written the lines attributed to her when explaining her efforts to “further political discourse in my community” rather than sitting in a “cosy leftie bubble with my baja-sporting friends, spending our free time attending vegan popup barbecues” and encouraging others to carry on campaigning “just because the piratical Conservative party now have a majority doesn’t mean that we’ve lost”.  I’d love to believe Charlotte naturally speaks of furthering discourse, her “leftie bubble” while dubbing opponents “piratical”.  It’s just that I sense the hand of someone else working hard to pen an admittedly amusingly-worded diatribe to silence her critics and defend her reputation.  I’m not saying Ms Church doesn’t believe wholeheartedly in what’s written under her byline – but I would have taken it more seriously had I believed it was by her, not for her. Tone of voice matters.

I’m all for getting the professionals in – but there is a point at which their work loses credibility when the audience thinks of the messenger and not the message. Perception matters.

Chuka Umunna’s deliberately amateurish leader candidacy video, shakily shot in Swindon, was similarly unconvincing – if you make these efforts to avoid being seen as a slick London-centric metro type, why wear an expensive suit and silk tie for the recording? Visuals matter too.

Sometimes an experienced guiding hand is needed. I watched Brian May, an amazing musician, hold sway on BBC’s Question Time. When he spoke gently about needing a new form of political discourse and voting system, he sounded genuine and plausible.  But soon afterwards, when implicating that a referendum on fox hunting was just as important as one on EU membership, you began to question the point of his place on the panel. I got distracted by the messenger and his message (I forgave the hair – it’s been around a while).

The problem for politicians, business leaders and those with positions of responsibility in the public eye is that really all people want is natural honesty alongside some realism.  Say when you don’t know, opine on subjects you really do understand, apologise when you get it wrong,  but above all speak genuinely if you want to convince.

Here’s a thought, paraphrasing Mr Keating, perhaps some do say it best when they say nothing at all…

12 May 2015

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