Updating the United Kingdom’s Third-Party Funding Moves

By Aray Ozbekova

In June 2025, the U.K. Civil Justice Council published its final report on reforming the court funding system. Civil Justice Council, Review of Litigation Funding: Final Report (June 2025) (available at https://bit.ly/46ZIeo9).

The main theme of the report was Third-Party Litigation Funding—TPF—which has become a hot discussion topic in the U.K. legal community following the Supreme Court’s decision in R (PACCAR Inc.) v. Competition Appeal Tribunal [2023] UKSC 28 (available at https://bit.ly/42xeUUB).

In PACCAR, the U.K. Supreme Court recognized that where TPF agreements have compensation conditions in the form of a percentage of the awarded amount, the TPFs fall under U.K. law regulating “Damages-Based Agreements.”  Thus, most TPF agreements, as a result of PACCAR, appeared at risk of invalidation, as strict requirements apply to Damages-Based Agreements.

Under the law—and up to the PACCAR decision--"claims management services” found in collective actions are regulated; such services are “advice or other services in relation to the making of a claim” and “other services” includes, in particular, a reference to “the provision of financial services or assistance.” Damages-Based Agreements Regulations 2013 (SI 2013/609) (available at https://bit.ly/3KLnPM0). That was seen to be limited to collective actions, but PACCAR added TPF to the scheme.

The Civil Justice Council, a public body that advises the U.K. court system, suggests in its report that the PACCAR interpretation undermines access to justice and contradicts the goals of collective enforcement of rights. “The Working Party concludes that litigation funding is an essential means to secure effective access to justice,” the report states, “and that for some types of dispute it is the only viable means by which dispute resolution can be funded.”

But the report did not recommend similar TPF regulation for arbitration matters, which it left to the ADR process itself.

The report suggests adopting new legislation confirming that TPF is not a subject to the regulations for a Damages-Based Agreement. That legislation was introduced, but stalled, in 2024. There has been a new push for a legislative correction in the wake of Sony Interactive Entertainment Europe Ltd v. Alex Neill Class Representative Ltd. [July 4, 2025] EWCA Civ 841(available at https://bit.ly/4oaCApY), where the appeals court upheld a litigation funding agreement and found that it didn’t fall under the Damages-Based Agreement regulatory scheme.

New Regulation Regime

Until now, in the United Kingdom, the Association of Litigation Funders has self-regulated the TPF market. Now, the Civil Justice Council says that this is not enough and recommends introducing “light” statutory regulation, which includes: oversight by the Lord Chancellor through secondary legislation; universal standards for transparency and sustainability of funds, and a ban on the interference of funding parties in litigation strategy or settlement negotiations.

The report proposes:

1. Information disclosure—the court and parties must be notified of the presence of TPF and the source of funds.

2. Financial stability—the funds must maintain capital at a sufficient level.

3. Compliance with anti-money laundering regulations—funding parties must comply with anti-money laundering requirements.

4. Prohibition of control—investors must not manage the litigation process.

5. Independent dispute resolution between claimants and funds, with costs to be covered by the funder.

6. “Standard terms” for Litigation Funding Agreements.

In cases involving collective claims and consumers, additional measures are provided:

• Consumer Duty principles for businesses, conduct of business rules, etc., as basic principles of the Financial Conduct Authority “coming under the scope of the Financial Ombudsman Service (FOS) and the Financial Services Compensation Scheme to provide an effective means to resolve complaints concerning funders and funding agreements.”   
• Mandatory consultation with an independent lawyer (King’s Counsel) before signing a contract.
• Judicial approval of TPF agreement terms.
• Mandatory expense insurance (“After-the-Event” insurance), as well as strict budget control.

At the same time, the Civil Justice Council proposes to create a Standing Committee on Litigation Funding, which would collect data on TPF, publish regular reports, and adjust its regulation.

Thus, the final report of the Civil Justice Council shows that after the PACCAR decision, the U.K. seeks to establish predictability and stability in the TPF area. The proposed measures establish transparency and frameworks for TPF participation in disputes, thus ensuring a balance between the interests of investors, claimants, and justice.

Recent Developments

On Aug. 6, the U.K. Ministry of Business and Trade published a new 10-year government review on the use of collective procedures under the 2015 Competition Law, posing questions that focus on TPF (review available at https://bit.ly/48tpNL4). 

At the same time, the Court of Appeal for Competition continues to enhance the use of TPF in collective proceedings. The practice of reviewing litigation financing agreements is actively developing, as evidenced by the combined cases decided at the end of July—Hammond v. Amazon.com Inc., et al., and Stefan v. Amazon.com Inc., et al., [2025] CAT 42 (available at https://bit.ly/3WxnZJA).

In these court cases, a new standard has been introduced requiring the appointment of “specialist cost lawyers” to review the law firm accounts submitted to the class representatives. 

Apparently, this approach will become the standard approach in collective proceedings, as stated by the tribunal.

U.K. legislation and TPF regulation is moving toward a more transparent and controllable system, even before the new legislation is expected to come into force next year. Progress in the United Kingdom's TPF regulation will give impetus to the development of this institution in international law.

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The author is a Doctor of Juridical Science candidate at Case Western Reserve University. Her dissertation focuses on the topic, “Disclosure of Third-Party Funding in International Arbitration.” Since earning her LLM from Pennsylvania State University, she has been serving in the International Arbitration Department of Kazakhstan's Ministry of Justice, a role she has held since 2015. She was a CPR Summer intern in July-August 2023.

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