Clifford Chance

On 2 June 2025, the Civil Justice Council published its much-anticipated Report following its review of litigation funding, making 58 specific recommendations that will shape future government action in the area.

The Report recommends the reversal of the UK Supreme Court's decision in R (PACCAR) v Competition Appeal Tribunal[1] (see below) and the introduction of a "light-touch regulatory framework" to replace the current self-regulation model for the litigation funding industry.

You can read our previous briefing on the state-of-play coming into this year here.

Packing up PACCAR?

In July 2023, the Supreme Court handed down a landmark judgment in R (PACCAR) v Competition Appeal Tribunal. Our briefing on the judgment is here. In essence, the Supreme Court held that the majority of litigation funding agreements ("LFAs") then in place were unenforceable.

The CJC has now recommended that the Government introduce legislation as soon as possible to reverse the effect of PACCAR, with both prospective and retrospective effect. This is not particularly surprising, given the widespread support for such legislation in the last Parliament, although the proposal for it to have retrospective effect was met with some opposition.

The CJC has recommended that the reversal of PACCAR ought to be implemented as soon as possible, with its other recommendations to be the subject of separate legislation, insofar as its proposals are accepted by the Government.

The Sunset of Self-Regulation?

The CJC has recommended that a "light-touch regulatory regime" is brought into law by a comprehensive "Litigation Funding, Courts and Redress Act". The recommendations are set out in full here.

The CJC's recommendations draw a distinction between cases funded by the lawyers/firms acting on those cases through fee arrangements (to be regulated as conditional fee and damages-based agreements under a revised regime) and litigation funding by third parties. The rejection of self-regulation for the latter arises from: 1) the fact that not all litigation funders are members of the Association of Litigation Funders and subject to its Code of Conduct; 2) the lack of sufficient capital adequacy requirements; and 3) the growth of the market and availability of litigation funding to non-commercial parties. Indeed, the Report proposes more stringent regulation where funding is provided to consumers and in respect of group litigation.

While the CJC has cast its recommendations as proposals for "light-touch" regulation, failure to comply with those regulations could impact the enforceability of litigation funding agreements and the potential costs liability of third-party funders depending on the circumstances:

• Sharing of information: the CJC recommended that information about funding (including the fact of funding, the name of the funder, and the ultimate source of the funding) should be disclosed in claims at the earliest opportunity. The CJC also recommended that a Standing Committee on Litigation Funding be created, responsible for data collection and the ongoing scrutiny of funding. Law firms, funders and the Courts should be placed under a duty to provide the Committee with data concerning funding arrangements and the claim, including how the claim concluded, the nature of any success fee or return to the funder, and the legal costs incurred.
• Capital adequacy requirements: no specific tests or levels of capital are required. Instead, "capital adequacy should be determined on a case-specific basis". The funder will itself be required (alongside the funded party's legal representative) to certify to the court that it has and maintains sufficient capital adequacy.
• A Consumer Duty: the CJC Report has suggested that the Consumer Duty should be "based" on the FCA's Consumer Duty, which we discussed in a previous briefing (here). Funders will be paying close attention to how the FCA's rules are adapted to the specific circumstances of litigation funding.
• The prohibition on control of litigation: this issue has recently been in the spotlight in the context of Innsworth's challenge to the settlement agreed in the Merricks v Mastercard action (see our prior blog here). The prohibition is certainly not a departure from the widely understood position, but the specific way it is framed and the meaning of "control" will be important details, if the recommendation is implemented. The Report proposes particularly stringent sanctions where the prohibition is breached: unenforceability of the funding agreement and the funder's liability for both the funded party's and adverse costs.
• Approval of an LFA: as part of the court's decision whether to approve an LFA, it should consider whether the funder's return is fair, just and reasonable. The CJC also recommended that the funder and the funded party's lawyer should certify that they did not approach, either directly or indirectly, the funded party to seek their agreement to pursue proceedings.
• Access to justice: the Government should further consider whether to introduce an Access to Justice fund, to be funded by a small percentage of profits from litigation funding and contingency fee funding arrangements. In addition, it should consider establishing alternative means to secure access to justice for low value or small claims (particularly collective actions). These could include regulatory redress schemes.

The impact of the report on the litigation market in the UK will depend on the extent to which the recommendations are implemented by the Government and how quickly they are to be implemented. While the reversal of PACCAR could be achieved in relatively short order, the introduction of the proposed regulatory regime is likely to be the subject of further debate if and when the Government brings forward detailed legislation.

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[1] [2023] UKSC 28; [2023] WLR 2594