Key Takeaways
The CJC's final report calls for clear legislative action and a tailored regulatory framework to restore certainty in third-party litigation funding. As courts and policymakers consider next steps, the outcome could reshape how funding is structured and enforced in UK group litigation.
In a recent OnPoint, we explored how the UK Supreme Court's 2023 decision in R (PACCAR) v Competition Appeal Tribunal ("PACCAR")disrupted the litigation funding industry by casting doubt on the enforceability of many existing litigation funding agreements ("LFAs"). In response to that ruling, the UK Civil Justice Council ("CJC"), a government advisory body, began evaluating LFAs and preparing recommendations. Last month, the CJC issued its final report, proposing a detailed roadmap to restore legal certainty and guide future regulation in this rapidly evolving sector.
In PACCAR, the Supreme Court held that LFAs in which a funder's return is tied to a percentage of recovered damages qualify as damages-based agreements ("DBAs"). Under current UK law, DBAs are regulated and often unenforceable. The decision therefore prompted concern and renegotiations of LFAs in active group claims.
In its June 2025 report, the CJC urged the UK government to enact legislation to counteract PACCAR's effects by explicitly excluding LFAs from the definition of DBAs and ensuring their enforceability, both retroactively and going forward.
Beyond PACCAR, the report proposes broader industry reforms aimed at increasing transparency around LFAs. While rejecting strict regulation, the CJC recommends replacing the current self-regulatory framework, based on the Code of Conduct of the Association of Litigation Funders of England & Wales, with a statutory "light-touch" framework tailored to the type of funded party. For consumer-facing claims and collective proceedings, it calls for safeguards like clearer disclosures about funding terms and risks, funder-financed independent legal advice, and court review of LFAs. These recommendations come amid intensifying scrutiny of mass litigation's broader economic impact. A Brussels-based think tank recently warned that the rise in group actions, many backed by third-party funders, could ultimately cost the UK economy up to £18 billion and discourage investment in key innovation sectors. Critics argue that settlements in these actions often disproportionately benefit funders and lawyers rather than claimants.
Meanwhile, the enforceability of revised LFAs remains uncertain. On June 11 and 12, 2025, defendants including Visa, Mastercard, and Sony argued before the UK Court of Appeal that LFAs structured post-PACCAR, which calculate funder returns as a multiple of invested capital, still amount to DBAs and thus remain unenforceable because they contain an express or implied cap preventing the funder's recovery from exceeding the total damages. Class representatives have pushed back, warning that such a reading would threaten the viability of collective actions.
The CJC's final report charts a course for managing the continued growth of litigation funding with enhanced transparency and regulatory oversight. Whether and when the government will act on these proposals remains to be seen, but for now, the battle over the future of litigation funding in the UK remains live.
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