London, 2 June 2025 – The Civil Justice Council (CJC) has released its Final Report on Litigation Funding, setting out a comprehensive framework for the future regulation of third-party funding in England and Wales.¹ The recommendations aim to promote access to justice while ensuring proportionate, “light-touch” oversight of the litigation finance industry.

Legislative Response to PACCAR

The CJC’s principal recommendation concerns the Supreme Court’s 2023 decision in R (PACCAR) v Competition Appeal Tribunal, which held that certain litigation funding agreements (LFAs) constituted damages-based agreements (DBAs). The report concludes that this interpretation undermines legal certainty and should be reversed by legislation.

We have commented PACCAR on our previous article Have the tables turned in the litigation funding industry?

The Council recommends that new legislation clarifies that litigation funding is distinct from DBAs and claims management services and to reinforce the principle that third-party funding and contingency fee arrangements operate under separate regulatory frameworks.

The proposed legislative reversal would restore clarity to funded litigation in England and Wales and reaffirm the jurisdiction’s attractiveness for collective and commercial proceedings. The CJC also recommended that new legislation to apply both retrospectively and prospectively, safeguarding existing LFAs.

Framework for Statutory, Light-Touch Regulation

The Civil Justice Council advises against immediate regulation by the Financial Conduct Authority (FCA), suggesting instead a review after five years. Under the proposed approach, the degree of regulation would vary according to the nature of the funded party:

• Commercial parties would be subject to minimal oversight, recognising their sophistication and bargaining power;

• Consumers and claimants in collective proceedings would benefit from enhanced protections, including independent legal advice, court approval of funder returns, and greater disclosure obligations.

Key regulatory principles would include:

• Case-specific capital adequacy requirements;

• Codification of the rule that funders must not control litigation strategy or settlement decisions;

• Conflict of interest and anti–money laundering provisions; and

• Disclosure of the fact and identity of funding at an early stage in proceedings.

The CJC expressly rejects the introduction of statutory caps on funder returns, noting that such restrictions could discourage investment and reduce access to justice.

Reform of Contingency Fee Agreements

The report also recommends a single, simplified framework for conditional fee agreements (CFAs) and DBAs. The proposed regime would:

• Implement the Mulheron-Bacon reforms to DBAs, where consistent with other recommendations;

• Confirm the legality of hybrid arrangements; and

• Transfer regulatory responsibility from the Ministry of Justice to the Civil Procedure Rule Committee.

The Council further calls for the legislative abrogation of the indemnity principle as it applies to both litigation funding and contingency fee agreements, to simplify cost recovery and enhance consistency.

Additional Measures

Complementary recommendations include:

• The establishment of an Access to Justice Fund, financed by a small percentage of funder and lawyer profits, to support early legal advice and non-court dispute resolution;

• The creation of a Standing Committee on Litigation Funding to collect market data and oversee ongoing reforms; and

• Codification of court powers to manage funded claims, including costs budgeting and capital adequacy compliance.

Looking Ahead

If adopted, the CJC’s proposals would provide a coherent statutory basis for third-party funding while maintaining the flexibility that has made the UK a global leader in litigation finance.

At Stonward Litigation Finance, we welcome the Civil Justice Council’s recognition of the vital role that professional funders play in expanding access to justice. The recommended framework would enhance market transparency without impeding innovation or restricting access to capital for meritorious claims.