Litigation funding overhaul urged as CJC seeks fast-track reversal of controversial PACCAR decision
The Civil Justice Council (CJC) has urged the UK government to reverse the controversial PACCAR ruling “as soon as possible” and adopt a light-touch regulatory regime for litigation funders in its long-awaited report released today.
The Litigation Funding Working Party, co-chaired by Dr John Sorabji of University College London and Mr. Justice Simon Picken, set out 58 sweeping recommendations aimed at improving third-party litigation funding and bolstering access to justice.
At the centre of the proposals is a call to formally regulate litigation funders, albeit through a proportionate, minimally intrusive framework. For now, oversight should remain with the Lord Chancellor, though the report suggests that responsibility might transfer to the Financial Conduct Authority (FCA) in five years.
The working party also called for legislation to reverse the 2023 PACCAR judgment, which cast thousands of funding agreements into legal doubt. The House of Lords’ decision had classified many litigation funding agreements (LFAs) as damages-based agreements (DBAs), rendering them unenforceable. The report’s authors argue that this ruling created uncertainty across the legal profession and chilled investor interest in funding potentially meritorious claims.
Embed from Getty ImagesSir Geoffrey Vos, Master of the Rolls and chair of the Civil Justice Council, described the report as “comprehensive and balanced”. He said it would allow third-party funding to “continue to support access to justice” while offering appropriate, proportionate oversight.
Key recommendations for baseline regulation include:
- Case-specific capital adequacy requirements for funders
- A clear bar on funders controlling litigation
- Conflict of interest safeguards
- Mandatory anti-money laundering compliance
- Early disclosure of funding arrangements, including the funder’s identity and funding source
The report stops short of mandating the disclosure of full agreement terms and rejects calls to cap funders’ returns—moves likely to reassure the litigation finance industry.
For more complex cases such as consumer claims, group actions, and collective proceedings, the report proposes tighter safeguards. These include applying a Consumer Duty, requiring parties to obtain independent advice from King’s Counsel, and securing court approval on whether funder terms are “fair, just and reasonable”.
The authors also recommend enhanced notice periods for opt-out class members, ensuring greater transparency about funding terms and parties’ rights.
A new mechanism is also proposed for resolving disputes between funders and claimants. It would offer low-cost, independent and binding adjudication, a timely suggestion given recent public spats in the funding world—most notably the dispute between Walter Merricks, class representative in the Mastercard interchange fee case, and Innsworth Capital, which opposed the settlement.
The CJC argues this mechanism should encourage consensual resolution where possible and carry regulatory consequences for breaches.
Neil Purslow, chair of the executive committee of the International Legal Finance Association (ILFA), welcomed the proposals. “This thoughtful and considered report quite rightly concludes litigation funding can and should remain an essential route to securing access to justice,” he said.
The report also paves the way for reviving fast-tracked legislation initially introduced by the Conservative government to overturn PACCAR. That bill, which enjoyed cross-party support, failed to pass before last year’s snap election. Labour chose to await the CJC’s final report before acting.
David Greene, co-president of the Collective Redress Lawyers Association (CORLA), urged immediate action. “Reversing PACCAR will finally put an end to the uncertainty that has hampered funders’ willingness to invest in important and meritorious cases,” he said. “The proposed light-touch regulation is a much-preferred route in this very young market.”
With pressure now on the Labour government to respond, the future shape of the UK’s litigation funding landscape may soon be redrawn.
