UK Litigation Funding: reform or retain?

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The Civil Justice Council (CJC) has closed its consultation on the future of the litigation funding market, drawing a range of responses from key stakeholders, including legal and regulatory bodies.

The consultation is part of the CJC’s wider review of third party funding which is looking at crucial issues, such as whether formal regulation of third party funding agreements is necessary, how to ensure fairness and transparency in funding arrangements, and how litigation funding can better support access to justice. At the heart of their review is the question of how to balance the interests of the funders, claimants, and the wider justice system. This, in turn, has raised issues such as whether funders’ returns should be capped, whether funding arrangements should be disclosed in litigation, and the role the courts should play in overseeing litigation with those arrangements.

Growing support for regulation

Some respondents to the consultation have chosen to publicise their response. Many of those who have done so appear to advocate for stronger and more formal regulation, arguing that the current self-regulatory model – led by the Association of Litigation Funders (ALF) – fails to adequately protect claimants. Several stakeholders outlined different approaches to regulatory reform, from financial services oversight to court involvement in determining funder recoveries.

The Legal Services Board (LSB)’s response backs effective regulation of the litigation funding market and proposes a dual approach: financial services regulators overseeing funders, while legal services regulators manage risk to litigants. The LSB argues that this model would bolster confidence in the funding market, protect consumers, and serve the broader public interest.

The Bar Council also calls for reform in its response, stating that “the current model of self-regulation through the Association of Litigation Funders…. has not worked.” It advocates for reform, based on the risk of satellite litigation focussed on funding disputes, which could derail cases. To address this risk, it proposes three possible solutions: (i) a mandatory code of practice for funders, overseen by a new litigation funding regulator; (ii) retaining self-regulation but increasing ALF’s powers; or (iii) court involvement in assessing and approving funder recoveries from damages.

The Association of Costs Lawyers (ACL) in its response raises similar concerns about the increasing volume of litigation funding, warning that unregulated growth “could have a negative impact and therefore some form of regulation, through an independent regulator or legislation, would be beneficial to ensure that the net positive that is currently provided is not eroded”. It also supports a cap on funders’ returns in most cases.

Support for strengthened self-regulation

In contrast, the Law Society’s response stops short of calling for formal regulation. Whilst acknowledging concerns about the balance between funders’ financial interests and claimants’ access to justice, it argues that only a minority of funded cases significantly expand access. Instead, it proposes a strengthened self-regulatory framework “with tighter principles, codes of conduct and complaints procedures”. It also calls for tougher penalties for non-compliance.

The International Legal Finance Association (ILFA) and ALF submitted a joint response defending the current self-regulatory model. They stress that litigation funding is a critical tool in the UK for enabling access to justice, particularly in light of the uncertainty following the Supreme Court’s decision in PACCAR. They argue that “the existing competitive funding market is best placed to assess and price the many risks involved” and reject any proposals to cap funders’ returns. Instead, they advocate for updates to the ALF Code of Conduct to ensure continued market stability.

What happens next?

With the consultation now closed, attention turns to the CJC’s final report, expected in summer 2025. Its recommendation for reform will be influential in shaping the future of litigation funding in the UK, in terms of whether the industry moves towards formal regulation, a strengthened self-regulatory framework, or a hybrid between the two. As litigation funding continues to play an increasingly prominent role in commercial disputes and group litigation, the outcome of its review could have far-reaching consequences for the future of the growing litigation funding industry.

For more information on litigation funding, take a look at our resources:

• How does litigation funding work in the UK?
• How can litigation funding help your business
• Litigation funding: 10 things you need to know

Or contact our specialist Litigation Funding team for further guidance.