Litigation Funding - Putting A Price On Justice?

Published: 2025-06-25 08:13:07 ET PCAR

Published on 06/25/2025 at 08:13

Litigation funding, where third parties fund claims in return for a fee, has grown significantly in the past decade particularly relating to class action lawsuits, commercial disputes and personal injury cases. It has become an increasingly important 'tool' for claimants, especially those who might otherwise be unable to afford the significant costs association with pursuing legal action.

In April 2024, the Civil Justice Council (CJC) established its review of litigation funding and recently released its final report (Final Report). The Final Report makes 58 recommendations for the introduction of "light-touch" regulation, aimed at promoting effective access to justice and improving the effectiveness and accessibility of litigation funding.

What you need to know

With a focus on increasing access to justice while minimising the risk of exploitation, in its Final Report the CJC has recommended two waves of reform:

Legislation is introduced to clarify that there is a difference between litigation funding and contingency fee funding; and

Regulations are introduced to impose "light-touch" requirements on litigation funding, particularly for consumer claims and any form of group litigation.

Background

In July 2023, the Supreme Court in R (on the application of PACCAR Inc and others) (Appellants) v Competition Appeal Tribunal and others (Respondents) [2023] UKSC 28 (PACCAR) controversially held that litigation funding agreements (LFAs) were a form of damages-based agreement (DBA). As a result, LFAs were mostly unenforceable for failing to comply with the DBA Regulations 2013.

Litigation funding has also raised a number of concerns, including that the influence of third-party financial interests could compromise the integrity of the judicial system, potentially encouraging unnecessary litigation or creating conflicts of interest.

To address the uncertainty and concerns surrounding litigation funding, the previous Government announced the CJC's review into litigation funding and introduced the Litigation Funding Agreements (Enforceability) Bill aimed at reversing PACCAR (which ultimately was not passed in the wash up before the 2024 general election).

Key Recommendations

The Final Report recommends two waves of reform and in doing so, notably:

The first reform being to reverse the effect ofPACCAR by introducing legislation with retrospective and prospective effect to make clear that there is a difference between litigation funding (i.e. funding provided by third parties) and contingency fee funding (i.e. funding provided to a party to a dispute by their legal representative through a CFA or DBA).

The second being to subject litigation funding to a formal, comprehensive regulatory scheme through regulations. There are a number of specific recommendations, including:

The CJC also made several recommendations to improve access to justice. For example, that the Government should consider introducing an Access to Justice Fund (which could contribute to the civil legal aid fund) and establishing a Standing Committee on Litigation Funding (which would be responsible for data collection and the ongoing scrutiny and review of litigation funding).

The CJC's final recommendation was that all recommendations except in relation to the reversal of PACCAR can be contained in a single statute.

What's next?

We wait with interest to see the extent of which the Government implements the Final Report's recommendations.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Avary Patutama Devonshires 30 Finsbury Circus London EC2M 7DT UNITED KINGDOM URL: www.devonshires.com