The Civil Justice Council's (CJC) Working Party on Litigation Funding, co-chaired by Dr John Sorabji and Mr Justice Simon Picken, published its Final Report on Litigation Funding on 2 June 2025. This is the second of two reports produced by the CJC following the UK Supreme Court decision in R (PACCAR) v Competition Appeal Tribunal, which cast doubt on the validity of many existing litigation funding agreements (LFAs) by determining that the LFAs used by the claimants in those proceedings were a form of damages-based agreement (DBA).
In its Final Report, the CJC has made 58 recommendations for the reform of litigation funding. Its cited aims are to promote effective access to justice, the fair and proportionate regulation of third-party funding, and improvements to the provision of other forms of litigation funding. The view of the CJC is that litigation funding should continue to develop organically alongside the overall litigation funding landscape, and so it recommends a light-touch approach to regulation. It also recommends the retrospective and prospective reversal by legislation of PACCAR, highlighting that Conditional Fee Agreements (CFAs) and DBAs differ to LFAs and should be separately regulated.
Statutory Regulation
The question of who should have regulatory oversight of the litigation funding industry has been the subject of much debate, with proposed candidates including the Financial Conduct Authority (FCA), the Courts, and the Solicitors Regulation Authority (SRA). In the Final Report, the CJC recommends that statutory regulation should take the form of Regulations issued by the Lord Chancellor. It rejects the proposal of regulation by the FCA, although it acknowledges that this should be re-considered five years after the introduction of a light-touch regulatory regime.
The Final Report draws a distinction between the regulations that should apply to litigation funding provided to commercial parties versus consumers and parties engaged in collective proceedings. While it advocates for a light-touch approach to regulation of litigation funding in respect of both, it proposes a greater degree of regulation for consumers or in collective proceedings. It sets out the minimum regulatory requirements that should apply to litigation funding generally, including case-specific capital adequacy requirements, codification of the requirement that litigation funders should not control funded litigation, conflict of interest provisions, the application of anti-money laundering requirements and disclosure at the earliest opportunity of the fact of funding, the name of the funder, and the ultimate source of the funding.
In addition to these minimum requirements, it proposes that the regulation of litigation funding provided to consumers should include the application of a regulatory Consumer Duty and the requirement for funded parties to be provided with independent legal advice concerning proposed LFAs. The Report advocates for enhanced notice of the litigation funder's return to parties in group actions during the opt-out period, however it explicitly rules out a cap on litigation funder's returns.
Introducing standard terms for Litigation Funding Agreements
The Final Report recommends the introduction of a set of standard terms for LFAs to be annexed to the proposed Regulations, as well as the introduction of mechanisms for the independent, low-cost, and binding resolution of disputes arising between funded litigation parties and their funders. This approach, the CJC believes, will provide greater consumer protection and clarity in the market, and reduce the costs ancillary to the provision of litigation funding.
The CJC recommends that these standard terms, as well as the Regulations, be developed with reference to Principles 4 to 12 of the European Law Institute (ELI) Principles. The ELI proposed a similar light touch approach to the regulation of litigation funding to that championed by the CJC.
Legal services regulation and court rules
The Final Report calls upon legal service regulators to review their current approaches to regulation in the context of litigation funding, and identify improvements that can be made.
The Final Report makes a number of recommendations for the reform of court rules, including the introduction of a statutory power enabling the courts and Competition Appeal Tribunal (CAT) to manage and budget the costs of funding claims, and a requirement to consider whether other non-court-based forms of redress are available for group actions. To this end, it recommends the revision of Civil Procedure Rules (CPR) Part 19 in line with the CAT Rules in respect of provision for litigation funding.
Implementation of the proposed reforms
The CJC urges the Government to prioritise the reversal of PACCAR, to end the uncertainty around the status of existing LFAs. The introduction of legislation to this effect should, it states, be the first action taken by the Government in response to the recommendations set out in the Final Report.
Once this has been addressed, the Final Report advises the Government to implement all of its other recommendations by way of primary legislation, containing provision for the making of further Regulations.
Finally, the CJC encourages the Government to consider the introduction of an 'Access to Justice Fund', which would be funded by a percentage of the profits from litigation funding and would have the objective of providing funding for the provision of initial legal advice and alternative dispute resolution. The requirement to pay a small percentage of the profits from litigation funding would be set out in the proposed new legislation.
This article was co-authored by Trainee Hamish Montgomery.
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