When Walter Merricks' estimated £14 billion claim against Mastercard^[1] – the first-certified collective proceeding in England and Wales under s.47B Competition Act 1998 – settled for just £200 million in early 2025, the headline was the size of the discount. But, arguably, the more interesting story concerns the activity of Merricks' litigation funder, Innsworth Capital Ltd ("Innsworth"), which has found itself on the opposite side of the courtroom to Merricks on a number of occasions since.

Most recently, Innsworth challenged, by way of judicial review, the decision of the Competition Appeal Tribunal ("CAT") approving distribution of the settlement between Merricks and the payment card giant – which the High Court dismissed earlier this month^[2]. From the funder's perspective, the decision raises a broader set of questions on the role of funders in collective litigation - including how funders get paid, how courts control their returns, and whether the business model that has driven the rapid growth of funded collective proceedings is sustainable.

Australia, a jurisdiction where third-party funding has long been a common feature of the litigation landscape, and the source of the authorities on which Innsworth relied in its challenge, offers a useful insight into understanding what may come next in the UK.

Two jurisdictions, one trajectory?

Since the introduction of the Australian class action regime in 1992^[3], more than 1,000 class actions have been filed in the Federal Court. While the first 500 claims took 25 years, the second 500 were filed within just eight^[4] – with litigation funders being a significant catalyst for this growth. By 2018, approximately 78% of all filed class actions were funder-backed.^[5]

The UK is following a strikingly similar path. While parties to civil litigation in England and Wales typically fund their own claims, in recent years third-party funding has become a significant feature of the collective proceedings landscape (which itself has seen rapid expansion since 2015). Several major Australian funders, including Omni Bridgeway and Litigation Capital Management, now operate actively across the UK market.

Both jurisdictions started with common law prohibitions on third parties funding litigation for profit.

• Australia's High Court cleared the way in 2006, holding in Fostif^[6] that litigation funding served a legitimate purpose in promoting access to justice.
• The UK charted a similar course – a series of Court of Appeal decisions between 2002 and 2005^[7] reached broadly the same conclusion, before the Jackson Report in 2010 endorsed third-party funding as a feature of the civil justice landscape.

Both jurisdictions then saw a decade of rapid market growth – funder assets in the UK grew tenfold between 2011 and 2022. In Australia, the post-Fostif expansion was even more pronounced. And both then experienced a regulatory shock that threw existing funding arrangements into doubt.

• In Australia, a series of judicial decisions between 2009 and 2022 produced significant uncertainty: the Federal Court first (unexpectedly) classifying litigation funding arrangements as managed investment schemes, triggering heavy-handed financial services regulation^[8], while a parallel debate over the availability of common fund orders raged on^[9]. The recent Blue Sky^[10] litigation confirmed the availability of settlement-stage common fund orders for the benefit of third-party funders (but not for solicitors).
• The UK's shock came following the PACCAR^[11] litigation in 2023, in which the Supreme Court (unexpectedly) classified percentage-of-damages funding agreements as damages-based agreements ("DBAs"), rendering many of them unenforceable - particularly in opt-out collective proceedings in the CAT, where DBAs are prohibited outright. The UK government has confirmed its intention to reverse PACCAR through legislation but, until that bill is passed, the uncertainty persists.

Course-correcting early

There are areas in which the two jurisdictions diverge. Australia's class action journey has been turbulent. Perhaps with the benefit of this observation, the UK has opted to take a different approach in some respects, with the Civil Justice Council ("CJC") recommending a purpose-built "light-touch" statutory regime^[12] from the outset.

• Australia's Federal Court class action regime, the first in Australia, has over three decades of judicial precedent covering the full spectrum of civil claims. By contrast, the UK's collective proceedings regime is in its relative infancy and, in the CAT, remains limited to competition claims.
• However, change may be afoot following the Law Commission's proposed consultation^[13]. A regime change may significantly expand the addressable market for funders to include broader consumer claims, which would correspondingly expand the range of sectors in which defendants may face funded collective proceedings in the UK.
• The two jurisdictions have arrived at mirror-image positions on contingency fees - Australia prohibits them for lawyers^[14] but permits funders to take a percentage of the recovery. The UK allows lawyers to charge contingency fees in ordinary litigation, but prohibits them in CAT collective proceedings, and the PACCAR decision caught funders under that same prohibition. However, should PACCAR be reversed as recommended, the UK could end up with a simpler (and arguably more coherent) framework than Australia's current position.

Observable trends

1. Courts are taking a more active role in scrutinising funder returns

Australian courts have broad powers to scrutinise the terms of funding agreements, and have long used these powers to reject or reduce disproportionate funder returns, ensuring fair and reasonable outcomes for group members. The CAT's approach to distribution in Merricks – insisting that the class should receive at least half the gross amount, and directing unclaimed funds to a charitable foundation rather than the funder – signals a judiciary that is similarly increasingly willing to look behind the funding agreement and assess whether the funder's return is proportionate to the risk taken. The High Court's support for the "wide powers" conferred on the CAT as expert and specialist tribunal, only serves to reinforce this position.

2. The market is consolidating

Australia's funding market went through a wave of consolidation as it matured – most notably the 2019 merger of IMF Bentham (Australia's first major funder) with Omni Bridgeway to create one of the world's largest litigation funding platforms. The UK appears to be entering a similar phase. Therium, one of the "big three" UK funders, transferred a large portion of its portfolio to US-based Fortress Investment Group in 2025 and pivoted to an advisory model. Vannin Capital was absorbed by Fortress. Consolidation means fewer but larger, more sophisticated funders with deeper capital reserves, and a shift from single-case funding towards portfolio-based models that spread risk across multiple claims. In Australia, this consolidation has occurred in parallel with funders working together to co-fund claims.

3. Funding is becoming a permanent feature of the disputes landscape

In Australia, third-party funding moved from novelty to standard practice within a decade of Fostif. The UK appears to be on the same trajectory with funders now deeply embedded in the economics and strategy of collective proceedings. The practical implication is straightforward: businesses should plan for funded claims as a recurring feature of their risk landscape. Innsworth's warning that "the market cannot function sustainably" in the absence of certainty as to fair returns, only serves to indicate that this is not the last time questions regarding litigation funding will be before UK courts.

Practically speaking

The useful question for businesses planning ahead is what may come next in the UK as its collective action regime develops - particularly following the latest from the High Court.

• Anticipate more claims – but a higher certification bar
  
  Legislative reversal of PACCAR is widely expected, and claims that have been deferred during the period of uncertainty are likely to be filed. If the Law Commission's proposals lead to an expanded opt-out regime for consumer claims, the addressable market will grow further.
  
  But the CAT is simultaneously raising the bar for what gets certified. Evans v Barclays^[15] has given defendants Supreme Court authority to resist opt-out certification of weak claims. Riefa v Apple^[16] created a standalone ground for challenging the suitability of the proposed class representative. Waterside^[17] demonstrates that claims offering trivial per-claimant recovery will not survive certification.
  
  Australia's experience also suggests that as the market matures, case selection becomes more disciplined – meaning the claims that do get funded are likely to be better resourced, more strategically coordinated and harder to defend than the first wave. Businesses that may once have considered themselves too large or too well-resourced to be viable targets for funded litigation should no longer assume that to be the case.
  
  Additionally, as the funding market in Australia has matured and returns to funders have stabilised, rather than looking to compete over the same claims, funders have shown a willingness to investigate and fund more novel claims that would not have met earlier funding criteria. Those claims have often included a social justice element (such as claims focussing on broad-scale environmental impacts or systemic sexual harassment in workplaces), no doubt driven with an eye to preserving the social licence required by funders to continue to generate healthy returns.   
• Don't take headline claim values at face value
  
  Merricks is the clearest illustration: a £14 billion claim settling for £200 million. Aggregate damages in collective proceedings are calculated using economic modelling that involves significant uncertainty, and pass-on analysis regularly compresses quantum dramatically. Early, rigorous economic analysis of real-world exposure – rather than reactive engagement after certification – will put defendants in a stronger position.
  
• Understand who is funding the claim and on what terms
  
  The CJC has recommended early disclosure of funding arrangements, including the funder's identity and the source of funds. Even before those reforms take effect, defendants can and should seek to understand the funding dynamics on the other side. Disclosure of litigation funding arrangements is now a standard feature of class action litigation before Australia's Federal Court.
  
  Merricks shows that the funder and the class representative do not always want the same thing – and those tensions can be strategically relevant at settlement. Increased judicial scrutiny at the distribution stage may also affect the economics of bringing funded claims and the terms on which funders are prepared to be involved. If funders face greater uncertainty about their ultimate returns, the threshold for what constitutes a "fundable" case may rise. This complex interplay is often made more complex again by the role of adverse cost insurance, and the influence of insurers in managing policy exposure.

The dynamics that will define funded collective proceedings in the UK over the coming years – judicial oversight of funder returns, tightening certification standards, the tension between access to justice and commercial incentive – are not untested. Similar dynamics have played out over three decades in Australia, and, for those navigating what comes next, could offer a helpful insight.

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_{[1] Walter Hugh Merricks CBE v Mastercard Incorporated & Ors [2021] CAT 28 (certification); Mastercard Incorporated & Ors v Merricks [2020] UKSC 51 (Supreme Court).}

_{[2] [2026] EWHC 1393 (Admin).}

_{[3] Part IVA of the Federal Court of Australia Act 1976 (Cth).}

_{[4] Robert Johnston, Alexandra Haggerty and Zoe Said, "Class Action Trends in Australia" (International Bar Association, 29 October 2025), available at <https://www.ibanet.org/class-action-trends-in-australia>.}

_{[5] Australian Law Reform Commission's report: Integrity, Fairness and Efficiency – An Inquiry into Class Action Proceedings and Third-Party Litigation Funders (Report 134, December 2018), page 74.}

_{[6] Campbells Cash and Carry Pty Ltd v Fostif Pty Ltd (2006) 229 CLR 386.}

_{[7]  Factortame Ltd v Secretary of State for the Environment, Transport and the Regions (No 8) [2002] EWCA Civ 932; Arkin v Borchard Lines Ltd [2005] EWCA Civ 655.}

_{[8] Brookfield Multiplex Ltd v International Litigation Funding Partners Pte Ltd (2009) 180 FCR 11.}

_{[9] Money Max Int Pty Ltd (Trustee) v QBE Insurance Group Ltd [2016] FCAFC 148. This was the first common fund order made in an Australian class action, by the Full Federal Court in October 2016.}

_{[10] Kain v R&B Investments Pty Ltd [2025] HCA 28.}

_{[11] R (on the application of PACCAR Inc and others) v Competition Appeal Tribunal and others [2023] UKSC 28.}

_{[12] Civil Justice Council, The Future of Litigation Funding: Final Report (June 2025).}

_{[13]  The Law Commission: Consumer Class Actions, see Consumer class actions   – Law Commission.}

_{[14] Save for a unique exception in the State of Victoria that permits the Court to order damages-based awards in favour of plaintiff law firms in non-funded class action claims. Recent murmurings have suggested that same regime may be adopted by other State supreme Courts as well as the Federal Court.}

_{[15] Evans v Barclays Bank Plc and others [2025] UKSC 48.}

_{[16] Christine Riefa Class Representative Ltd v Apple Inc [2025] CAT 5.}

_{[17] Waterside Class Limited v Mowi ASA & Ors [2026] CAT 32.}