Lawyers welcome ‘light touch’ proposals on litigation funding

The 150-page ‘Review of litigation funding’, published this week, was produced at the request of the Lord Chancellor following the Supreme Court decision in R (PACCAR) v Competition Appeal Tribunal [2023] UKSC 28. There, the court held certain litigation funding agreements are a form of damages-based agreement (DBA) and therefore invalid.

The CJC’s 58 recommendations include legislation with both ‘prospective and retrospective effect’ clarifying that litigation funding is not a form of DBA nor a form of claims management service. It suggests the Lord Chancellor rather than the Financial Conduct Authority bring forward regulation of litigation funding.

Regulation where commercial parties are concerned may be ‘minimal’, whereas consumers, collective proceedings and group litigation will require ‘greater, but still light-touch regulation’.

As a minimum, there should be ‘case-specific capital adequacy requirements’, provision that funders should not control litigation, conflict of interest provisions, anti-money laundering provisions and disclosure of the fact of funding, name of funder and source of funding. 

However, the CJC working party, led by Dr John Sorabji and Mr Justice Picken, agreed the terms of the agreement need not be disclosed and also rejected caps on funders’ returns. Litigation funding for arbitration will not be covered by the regulations.

Sir Geoffrey Vos, Master of the Rolls and CJC chair, said: ‘This landmark piece of work epitomises the raison d’être of the CJC: promoting effective access to justice for all.’

Professor Dominic Regan, of City Law School, said: ‘All credit to the CJC for publishing a report so quickly given the extension of the original consultation period by several weeks.

‘The Master of the Rolls described the Supreme Court decision as “controversial”; he didn’t agree with it. Good to see retrospective legislation is proposed. That would avoid much squabbling.’

David Bailey-Vella, chair of the Association of Costs Lawyers (ACL), said: ‘There is a lot to like… The working party has put forward measured proposals to regulate third-party funding, as the ACL had recommended… but much will depend on how the new litigation funding regulations, if introduced, are drafted.’