Civil Justice Council Review of Litigation Funding

Jim Shannon Excerpts

Wednesday 29th October 2025 Westminster Hall

[Sir Julian Smith]

I agree with the hon. Member; the Vodafone case, which involved franchisees across the UK, is another example of how litigation funding can help.

The Supreme Court’s judgment in the PACCAR case in July 2023, which involved a claim against truck manufacturers for anti-competitive behaviour, rendered many third-party funding agreements unenforceable by bringing them in scope of another type of legal funding agreement, damage-based agreements. The impact of the judgment on the litigation funding market has been two years of instability and a lack of clarity about its contractual operating terms. The last Government sought to remedy the issue by introducing the Litigation Funding Agreements (Enforceability) Bill, which had reached Second Reading in the House of Lords immediately prior to the election.

[Jim Shannon (Strangford) (DUP)]

I commend the right hon. Gentleman for securing the debate; he was right to do so. Although no win, no fee seems like the only reasonable option for those seeking compensation in the civil courts to fund their cases, they can be easily taken advantage of, so does he agree that we need a framework that allows for a reasonable exchange of risk and benefit to consumers, rather than putting the ability to fight for justice just beyond their reach?

[Sir Julian Smith]

I agree with the hon. Member; I will come to some protections that I think he might be attracted by.

The last election stopped the Litigation Funding Agreements (Enforceability) Bill, which was going to overturn the PACCAR judgment, but on 1 August 2024, Lord Ponsonby said in a written answer to a parliamentary question that the new Labour Government

“recognises the critical role third-party litigation funding plays in ensuring access to justice.

Following the PACCAR judgment, concerns have been raised about the need for greater regulation of Litigation Funding Agreements…The Government is keen to ensure access to justice in large-scale and expensive cases, whilst also setting up adequate safeguards to protect claimants from unfair terms.

The Civil Justice Council is considering these questions and others in its review of third-party litigation funding, and hopes to report in summer 2025. The Government will take a more comprehensive view of any legislation to address issues in the round once that review is concluded.”

The Civil Justice Council review concluded in June this year. The litigation funding industry, businesses and the legal sector await the Government’s response. The current lack of response to the report is causing significant uncertainty to the sector and additional costs for those fighting for businesses and consumers. Although the Government are inevitably busy on many fronts, action on this is needed now and will be positive for the UK economy.

I will return to the recommendations of the CJC report shortly, but I just want to emphasise two broader points. First, the legal sector in the UK was worth about £52 billion in 2024, up by about 10% on the previous year. Litigation funding is estimated to have quadrupled since 2013, with more than £1 billion capital estimated as currently available to litigation. In 2023, PwC UK predicted growth at a compound annual growth rate of more than 8% over five years.

On a global basis, the global litigation funding market was approximately $20 billion in 2025 and is expected to be closer to $49 billion in 2035. Legal services with litigation funding are an important component and a vital export opportunity as the UK continues to be the leading centre for global disputes of all kinds and can stand to win significant revenues from deals such as the ones the Government have done with India, the US and, this week, Turkey. Services of all shapes and sizes, but particularly legal services, are a key UK economic sector and we should bear that in mind during this debate.

The second broader point is that litigation finance significantly assists with access to justice, as we have heard, discouraging large companies from anti-competitive or anti-consumer behaviour. Litigation finance funds cases of all shapes and sizes, but particularly class actions where there is a potential case against large and often global firms who unknowingly—or often knowingly —have breached the UK’s competition law.

UK competition law was crafted over many years to ensure an efficient market protecting consumers and fostering fair competition between companies, encouraging better and more effective growth. Both issues matter to UK citizens as they directly impact incomes and financial costs for families across the United Kingdom. We need one of our most successful service sectors to operate with a full focus on expansion and growth. That means more jobs, which mean more tax revenue. We need UK consumers to have routes to take on the huge might of the global companies from which they buy products and services, but that have such large market share and resources that they can more or less do what they want.

The Competition Appeal Tribunal was extended in 2015 by the coalition Government to include opt-out collective actions to enhance competition, ensure prices stay fair and that businesses do not abuse their position and keep innovating. As Ministers said at the time:

“Competition is one of the great drivers of growth”,

For many consumers, who are often on low incomes, cases in the CAT, funded by third-party litigation funding, is the only route to challenge and hold large companies to account.

Neither point is intended to imply that everything is perfect, but the PACCAR judgment and the need for legislation to remediate the situation, the CJC report that is the topic of this debate and a recent call for evidence on the opt-out regime at the Competition Appeal Tribunal, run by the Department for Business and Trade, all risk slowing down an important growth market for the UK if Government responses are not executed quickly, proportionately and with vision. Improvements can clearly be made to the oversight of the litigation funding sector, and also in the operation of the Competition Appeal Tribunal. Having said that, despite heavy lobbying for change, there is no evidence that the UK’s ranking as a destination for foreign direct investment has been affected by our vibrant competition regime. Moreover, private enforcement of the regime through the CAT seems to be good value for money, with just over £5 million in costs for the Competition Appeal Tribunal and £118 million for the Competition and Markets Authority.

The first recommendation of the CJC report is:

“Legislation should be introduced to make clear that litigation funding is…a distinct form of funding”.

It also recommends that the effect of the PACCAR Supreme Court judgment should be overturned. Although the market has, to an extent, adapted to that judgment in June 2023, the bulk of submissions to the review and elsewhere highlighted the impact on the provision of funding. Less money has been delivered to claimants, and there has been a reduction in the number of CAT cases. The report’s main ask is to get legislation in place and to overturn PACCAR. I would be interested to hear the Minister’s response on when that will happen, and a clear timeline. It would be good to get it done in this Session of Parliament. I would also be interested in the Minister’s comments on the change being retrospective, which seems fraught with complications. On the previous Bill’s Second Reading debate in the House of Lords, Members raised concerns.

Other flagship recommendations in the CJC review relate to the move from self-regulation by the Association of Litigation Funders not to the Financial Conduct Authority, which some proposed, but to light-touch regulation put in place by the Lord Chancellor. The proposals are for differential regulations for the type of claimant: very little for commercial disputes, and lighter touch for consumer, representative or class actions.

The review proposes a minimum baseline set of regulatory requirements, focusing on case-specific capital adequacy, codification that litigation funders should not control the litigation process, conflicts of interest and money laundering. Additional light-touch regulation is proposed for groups and consumer claimants, to include a consumer duty, early court approval of the funding agreement and a court assessment of whether the lender’s return is reasonable. Further measures include the provision of independent legal advice for consumers before entering into funding agreements, and a prohibition on litigation funders controlling proceedings or settlement proceedings.

In reflecting on the proposals, the Government must be alive to the risk of fettering an innovative and successful industry that enables consumers to mount challenges against Goliath-sized firms. I encourage them to take a pragmatic view, driven by the market. There may be merit in applying some elements of the CJC report through regulations, but it is worth considering strengthening the current self-regulation regime, including by getting all players operating in the UK market to join the Association of Litigation Funders—it is a self-regulation body has a code of practice, but not all litigation funders are in it. I call on the industry to get everybody operating in litigation funding in the UK on board in the association.

There are proposals to use redress schemes and other forms of non-court-based resolution more regularly. I believe strongly in alternative routes to settlement, so I agree strongly with those proposals. Much more can be done to offer settlement options, including encouraging settlement rather than litigation, offering mandatory mediation in parts of the CAT process, and making mediation a clause within the process for litigation funding agreements. Avoiding costly disputes is generally a good thing. Focusing on settlement, not litigation, in the Government response would help in that regard. Mandatory mediation would also help to ensure that disputes between litigation funders and law firms are handled more clearly.

Although I acknowledge that improvements need to be made, I hope that the Minister and the Government will reflect on the potential motivations of some of those who look to impose heavy changes on opt-out. Opt-out, and its reliance on litigation finance, offers consumers a powerful opportunity for redress. The Government opt-out review, introduced earlier this year, references perceived burdens of the current regime on business, but there seems to be little evidence of our competition law putting off inward investment. The UK is seen to be a great place to invest and the same arguments that helped to build the UK competition rules stand today. If there is no fear of being brought to book, some companies will continue to rip off and abuse consumers. If they are abiding by UK competition law, they have nothing to fear.

While acknowledging that improvements can be made, we should be sceptical of those who seek to fetter consumer rights and should instead make the case for an expansion of those rights in the interests of our citizens and UK economic growth. A strong defence of consumer rights is the best way for the UK to continue to thrive, for the UK economy to grow, and for inward investors and domestic businesses to stay lean and competitive.

Whatever the Minister’s response today, I hope that the Government will soon introduce a Bill to address PACCAR, the primary recommendation of the CJC report, and will seek to look at practical ways to implement elements of that report while avoiding adding burdens, cost and micromanagement on to an innovative and important sector.