In granting a Collective Proceedings Order (CPO) for a recent case, the Competition Appeal Tribunal (CAT) has emphasised its renewed commitment to ensuring that class members benefit from such proceedings. While the Tribunal has allowed the case to proceed, it signalled that it will adopt a stricter stance on the adequacy of distribution plans, both in this case and moving forward.

This development is important for both solicitors and litigation funders. This is because the Competition Appeal Tribunal’s (CAT) stricter stance on the suitability of distribution plans directly affects how compensation is distributed to class members.

Background of the case

The Tribunal approved an opt-out Collective Proceedings Order (CPO) brought by Clare Spottiswoode. This was following a European Commission finding that 11 producers of high-voltage power cables had violated competition collective law from 1999 to 2009. The case seeks to represent individuals who bore the cost of electricity supplied via the British distribution network, alleging that the cartel’s overcharges led to higher electricity bills for consumers. The class size is estimated to exceed 30 million people. 

Distribution plan

The Tribunal raised concerns about how to effectively distribute compensation to such a large class. This was especially important given the difficulty consumers may have in recalling electricity bills over a 20-year period. It noted that the small amounts due to each consumer might deter participation. The Tribunal stressed that complicated legal proceedings that mainly benefit lawyers and funders, rather than consumers, would be undesirable.

To address these concerns, the Tribunal suggested using credits on electricity bills as a distribution method previously mentioned by the Court of Appeal. However, the class representative preferred to wait until damages were awarded. The Tribunal insisted that the distribution plan be developed now and required the class representative to report back within three months, warning that failure to address the issue could lead to the case being decertified. 

Class definition

The defendants challenged the proposed class definition, which included anyone who “bore” the cost of electricity bills, such as household members. The Tribunal found this definition problematic, as it would require individuals to analyse their financial contributions to household bills. The definition was therefore narrowed to only those who directly paid electricity bills. 

Litigation budget

The defendants argued that the proposed budget was less detailed than in previous cases. The Tribunal clarified that the budget is crucial for evaluating costs and the overall value of the case. While further details were requested, the Tribunal did not require disclosure of advisors’ rates. 

Balancing benefits for class members

The Tribunal emphasised that collective proceedings must primarily benefit class members. This ruling, along with decisions on class definitions and budget transparency, reflects the Tribunal’s evolving approach to ensuring collective actions are in the best interest of those they represent.

Why is this case important for litigation funders and solicitors?

The recent ruling by the UK’s Competition Appeal Tribunal (CAT) class action regime in the power cables case sends a clear message about the responsibilities that come with claims brought under collective proceedings. The decision emphasises a stricter approach toward ensuring that class members genuinely benefit from the litigation brought on their behalf.

In allowing the case to proceed, the CAT has set the tone for a more rigorous review of distribution plans. The Tribunal’s insistence on an early resolution of distribution issues reflects a growing concern that, without careful planning, collective actions risk primarily benefitting lawyers and funders—while delivering little to class members.

For litigation funders and solicitors, this judgment highlights the importance of realistic distribution plans. The Tribunal’s warning that it may decertify proceedings if these plans aren’t adequately addressed creates a clear requirement to ensure that future cases are structured in a way that maximises benefits for claimants.

Finally, on the subject of litigation budgets, the CAT’s call for more detailed assumptions and breakdowns at each stage of the proceedings is a step towards better case management and transparency. This judgment serves as a reminder that litigation funders must work closely with class representatives to ensure that their budgets are not only realistic but also capable of withstanding CAT’s increasingly stringent review process.

Litigation funding for collective proceedings

Litigation funding and ATE insurance can play a pivotal role in assisting solicitors and their clients in collective proceedings. Solicitors can make use of the following funding methods:

• After-the-event (ATE) legal insurance – ATE insurance is generally used to protect from adverse costs risks & Security for Costs requirements. After-the-event (ATE) legal expenses insurance is perhaps best thought as a similar to a ‘swap’. For either no upfront fee or a small upfront fee, the insurer takes on all of the risk of the potential adverse costs award.

The claimant has swapped their obligation to pay the defendants in the event of a loss, with the obligation to pay the insurer in the event of a win. This ‘swap’ is generally an attractive swap as the client is likely to be in a better financial position following a win than following a loss. Also, the payment to the insurer will only be a percentage of the adverse costs rather than the whole amount.

Structuring ATE for group actions is important, to ensure the right level of cover is provided, but that premium costs are kept manageable. There are a variety of ways that insurance costs can be mitigated, and working with a reputable, regulated broker, is a good starting point.

• Third party litigation funding – In some cases, third party litigation funders may be willing to provide funding for a claim in exchange for a share of any financial settlement or damages awarded. This option can be attractive when there are no funds to pursue a strong case. ATE insurance is often used in conjunction with this type of funding.

Funding for group actions can be expensive, given the potentially high costs of such claims. Thought should be given to the appropriate structure of the group, and decision making authority, as well as different ways to mitigate costs, through retainers and insurance.

• Damages Based Agreements v Conditional Fee Agreements – Depending on the forum, there may need to be consideration given to the right sort of retainer, and how this might intersect with both funding and insurance. Understanding the whole picture is important, and one of the reasons that clients work with Annecto, is that the team are well versed in all forms of retainer, funding and insurance, to provide a more rounded view on options.

How can Annecto Legal assist?

At Annecto Legal, we assist a wide range of clients in finding the appropriate litigation funding and after-the-event (ATE) insurance. We encourage solicitors to explore all options with clients, rather than allow strong cases to fall away or under-settle due to lack of funds.

If you are looking for advice on alternative funding methods for collective proceedings, get in touch today for an initial consultation with a member of our team.