The Civil Justice Council’s Final Report on Litigation Funding (“The Report”), published in June 2025, arrived with considerable anticipation. The Report aims to provide a clear vision for the future of third-party litigation funding in England and Wales. If taken forward, the suggestions proposed in the Report could address the legal uncertainty caused by PACCAR, introduce light-touch regulation for funders, and offer greater protection to consumers and group claimants. However, the guidelines proposed in the report are currently just recommendations, and it remains to be seen whether they will be implemented. Furthermore, even if they are implemented in full, it is unclear whether these changes will be enough to make the UK an attractive market for litigation funders.

The Report’s Recommendations

The Report’s headline recommendation is that Parliament should urgently reverse the Supreme Court’s decision in R (on the application of PACCAR Inc) v Competition Appeal Tribunal [2023] UKSC 28 (“PACCAR”). In PACCAR, the Supreme Court held that litigation funding agreements (LFAs) entitling funders to a share of damages were equivalent to damages-based agreements (DBAs) and so were unenforceable unless they complied with the DBA Regulations 2013 (“the DBA Regulations”). This caused considerable uncertainty as to the enforceability of existing LFAs and had a chilling effect on the market, as funders became cautious of entering into new LFAs in fear that they may be deemed unenforceable. This uncertainty is unhelpful to all parties, including clients, funders, courts and insurers. The Report proposes reversal of PACCAR to eliminate this concern.

Beyond PACCAR, the Report also calls for a regulatory regime to formalise what is currently a self-policing industry. This would entail baseline requirements for transparency, capital adequacy and funder conduct, along with enhanced protections in collective proceedings. Funders would not be subject to the same kind of scrutiny as banks or financial advisers, but there would be real oversight, particularly where consumers were involved. The intention is that this light-touch regulation would protect clients whilst still allowing a commercially attractive market for funders so as to promote access to justice.

The Report recommends that funders should be required to:

•             Demonstrate that they have adequate capital to meet their funding obligations;

•             Avoid exercising excessive control over the litigation;

•             Disclose their identity and involvement to the court and the other side; and

•             Offer fair dispute resolution mechanisms to funded claimants.

In mass or collective actions, the Report goes further, proposing that:

•             Courts should be given a formal role in approving funding agreements at an early stage;

•             Claimants (especially consumers) should be required to receive independent legal advice before entering LFAs;

•             Rules should be aligned so that procedures are consistent across the Competition Appeal Tribunal (CAT) and CPR Part 19 group litigation; and

•             Costs budgeting and pre-action protocols should be encouraged to help streamline complex group claims.

There is also a forward-looking recommendation to review the effectiveness of the regime five years after implementation. If the regime is not working, or if funder misconduct emerges, the Report leaves the door open to more formal regulation, potentially involving the FCA or a bespoke supervisory body.

Will These Reforms be Implemented?

Parliament has already shown interest in reversing PACCAR through the Litigation Funding Agreements (Enforceability) Bill 2024 which passed Second Reading in the House of Lords in April 2024. However, the bill fell during the pre-election ‘wash-up’ period before Parliament was prorogued for the July 2024 general election. The new government opted to pause legislative action until the CJC completed its review, and it remains to be seen whether it will now pick up the thread of reversing PACCAR or implementing the Report’s recommendations. However, the Report gives policymakers a clear menu of actions and many of its proposals seem balanced and workable.

In the meantime, the market is already adapting and there appears to be a genuine possibility that practice may move faster than policy. Funders have redrafted agreements to steer clear of the DBA regime. Courts, particularly in the Competition Appeal Tribunal, are taking a more active role in scrutinising funding terms. Many commercial claimants are proceeding with their cases, carefully structuring funding in a way that avoids enforceability pitfalls. By the time any statutory framework is introduced, it may be solving problems the market has already found workarounds for.

Are These Reforms Enough to Create an Attractive Market for Funders?

Even if the reforms are implemented, and there is enhanced certainty regarding the enforceability of LFAs, this may not be enough to make the English litigation funding market attractive to funders. The new framework would introduce court oversight of funder fees, particularly in group or consumer claims. Funders might be required to disclose more about their capital and decision-making. There would be tighter rules around influence and control and in consumer cases, judges may be asked to approve funder compensation on fairness grounds.

While these rules would help to protect clients from unfair funding arrangements or influence from funders, they also reduce the commercial attractiveness for funders. Funders already face the reality that many claims, especially those that are novel, cross-border, or fraud-related, are inherently risky. If returns are capped, or subject to judicial review years down the line, some may decide it is not worth the regulatory burden.

Even for funders who remain in the market, capital may become more selective. We could see a shift toward safer, simpler claims with less appetite for taking on cases that are novel or potentially precedent-setting. This caution could stifle legal progress and development.

What Does This Mean for Clients?

If litigation funding lacks commercial attractiveness for funders, it is a problem not only for funders but for clients too. Litigation funding is an important component of achieving access to justice and is often the only realistic path for parties facing large, well-resourced opponents. If funders start to exit the UK market, or avoid funding complex claims, parties without major resources may be denied access to justice.

If the Report’s recommendations are implemented and we are left with a framework that supports access to justice without stifling the commercial realities of funding, then we may be entering a new dawn of increased litigation funding opportunities with greater protections for clients. However, even if the law does change, clients should not assume the landscape will suddenly become more favourable. If anything, greater regulation may slow the funding process, reduce available capital, or increase scrutiny of returns.

Conclusion

As ambitious as the Report may be, it has no legal effect if not implemented by government. There is still a real possibility that the law will not change significantly. In that case, funders and claimants will need to keep adapting, relying on careful drafting and informed risk assessment.

For now, the smart approach is caution combined with flexibility. Funders should ensure their agreements comply with the current law. Claimants should work with firms that understand both the commercial and legal risks of various funding arrangements. And all parties should keep a close eye on the direction of travel in Parliament, the courts, and the market.

CANDEY is a boutique litigation law firm that has extensive experience and resources to evaluate and advise on litigation funding arrangements. We are keeping our eye on reforms in this area and are equipped to navigate the future of litigation funding, whatever shape it may take.

Note: This is a general summary of an evolving field of law, and is made available for general discussion purposes only between CANDEY and its clients and prospective clients. This memorandum does not constitute legal advice and must not be relied on as such. It should also not be cited as legal or academic authority.