A new approach to regulation of litigation funding in the UK

On 2 June 2025, the Civil Justice Council’s (CJC) Working Group published its Final Report on litigation funding (the Report). The CJC started its review of litigation funding in April 2024 and the Working Party held a four-month public consultation which closed in March this year.

The Report makes wide-ranging recommendations that aim to promote “effective access to justice”, the fair and proportionate regulation of third party litigation funding (TPLF), and improvements to the provision and accessibility of other forms of litigation funding.

The Report’s numerous recommendations will, should they be enacted, have significant implications for the future of TPLF in the UK.

The Report’s key recommendations

The CJC recommends that the current self-regulation of funding in the UK be replaced with a single statutory regime for all forms of litigation funding. “Minimal” regulation is suggested for where funding is provided to commercial parties, but “greater” regulation where the funded party is a consumer, or the funding relates to collective proceedings, representative actions or group litigation. The CJC suggests that a “minimum, base-line, set of regulatory requirements” should apply to litigation funding in general (with such “light touch” regulation to be revisited after five years).

As expected, however, the Report follows years of UK government policy in treating the availability of funding as essential in the promotion of access to justice. Many funders will welcome the recommendation that the PACCAR decision be retrospectively and prospectively reversed to ensure that litigation funding agreements (LFAs) are not treated as damages-based agreements (DBAs). They will also welcome the position taken on the associated funding costs, fees and caps.

“Light touch” regulation – key recommendations

• The existence of funding, the name of the funder and the ultimate source of the funding should be disclosed at the earliest opportunity to the parties involved in the litigation. However, the terms of LFAs should not, generally, be disclosed.
• The requirement that litigation funders should not control funded litigation should be codified and there should be provisions for the prohibition and resolution of conflicts of interest.
• A breach of the Litigation Funding Regulations proposed in the Report should render any regulated funding agreement unenforceable.

Enhanced regulation – key recommendations

• Funders should be subject to a regulatory Consumer Duty, which should be based on the FCA’s Consumer Duty.
• The funded party should disclose to the court, on a without notice basis, the terms of the funding agreement, to enable the court to consider whether to approve the agreement. The court should particularly consider whether the funder’s return is fair, just and reasonable.
• The introduction of caps on litigation funder returns is rejected

Costs – key recommendations

• Litigation funding costs are recoverable only in exceptional circumstances which are to be determined by the court depending on case specific events and conduct of the parties.
• Costs Budgeting should be made mandatory in group actions involving litigation funding, and a party to such litigation should be entitled, on application, to seek Costs Management at the pre-action stage.
• The presumption that a litigation funder or a funded party must provide security for costs is rejected

Comment

The long term impact of the Report will turn on whether the UK government seeks to pass legislation to implement the recommendations and the detail of what is enacted if so. If the CJC’s recommendations are all enacted, the group litigation and funding landscapes in the UK would change significantly.

At this stage, the overall acceptance by the CJC of the need to regulate the provision of funding in the UK, particularly to protect consumers in the group litigation context, will be welcomed by those who consider the rise of funded group litigation to be damaging to the interests of business and often not in the best interests of claimants. Many funders, meanwhile, will be encouraged by the overall status their role has been accepted to serve in the promotion of access to justice, that regulation overall should be “light touch” and the recommendation that PACCAR be comprehensively reversed. They will, no doubt, however, be scrutinising very closely the details of those suggested recommendations they should face and the possible operation of the various costs proposals.  

We will continue to monitor responses to the Report and provide updates on further developments.

Related items:

• Third party litigation funding in the UK: is access to justice fair game?
• The end of litigation funding?