Shaping the future of litigation funding: the Civil Justice Council’s vision for reform

The Civil Justice Council (CJC) has set out a bold and sweeping blueprint for reforming litigation funding in England and Wales. Its final report, which was released on 2 June 2025, makes 58 recommendations covering everything from third-party litigation funding to conditional fee agreements (CFAs), damages-based agreements (DBAs) and consumer collective actions.

Crucially, their report also calls for a full legislative reversal of the Supreme Court’s decision in PACCAR and with it, a reset of the current uncertainty gripping funders, law firms and claimants alike.

Why did the CJC review take place?

Litigation funding has grown significantly over the past decade, purporting to enable access to justice in regard to high-value and high-risk claims. But it is not without controversy. Questions around transparency, control, consumer protection and ethical implications have lingered. Then, came PACCAR.

The 2023 Supreme Court decision classified many litigation funding agreements (LFAs) as DBAs, making them unenforceable under the DBA Regulations 2013. The previous government attempted to push through a legislative fix, but the bill lapsed before the 2024 general election and didn't make it through wash-up. The current government has since held back pending the CJC’s review and recommendations.

Reversal of PACCAR

The CJC has now spoken and it’s clear: PACCAR should be reversed and the CJC’s final report calls for urgent legislation to restore the enforceability of LFAs, both retrospectively and prospectively.

No cap on funder returns

In a positive move for commercial litigation funders, the report rejects the imposition of fixed caps on funders’ returns, concluding that such caps could reduce access to funding in regard to risky or complex cases and that existing court oversight is sufficient to keep funder returns within fair bounds.

Similarly, it also recommends no caps on the success fees payable to legal representatives acting under a CFA or DBA where the client is a commercial party.

A new ‘light touch’ regulatory regime for now

Central to the CJC report’s recommendations is the introduction of a ‘light touch’ regulatory regime for litigation funding. The CJC proposes replacing the current self-regulatory and voluntary approach (led by the Association of Litigation Funders) with a new statutory regime, modelled on the European Law Institute’s principles.

It recommends two separate regulatory regimes: one for CFAs and DBAs (Contingency Fee Regulations); and one to govern third-party litigation funding (Litigation Funding Regulations). The proposed regulation would not extend to the funding of arbitration, with regulatory matters remaining with arbitral institutes to determine.

These regimes would introduce:

• case specific capital adequacy requirements to enable the meeting of the financial obligations under the funding agreement;
• codification of the current prohibition on litigation funders controlling funded litigation or settlement;
• a prohibition on and resolution of conflicts of interest;
• the application of anti-money laundering requirements; and
• early disclosure to the court and other parties of the fact of funding, the name of the funder and the ultimate source of funding (but not the terms).

Breach of the regulations would render any regulated funding agreement unenforceable, although the court should have power to waive regulatory breaches where just and reasonable to do so.

Notably, Financial Conduct Authority (FCA) regulation is not recommended at this stage, but should be reviewed in five years’ time following the implementation of the ‘light touch’ regime.

Differentiation between commercial and consumer users

The review recommends differential treatment: commercial users should need only minimal regulation, while enhanced safeguards should apply to consumer-funded parties or where funding is provided in collective proceedings, representative actions or group litigation.

Enhanced protections for class actions or consumer claims

In regard to class actions or consumer claims, the report proposes a tougher regime, including:

• a new consumer duty requiring funders to provide clear, upfront information about the funding;
• independent legal advice from a King’s Counsel (KC) on an LFA, before entering into the agreement;
• disclosure of the LFA to court, on a without notice basis, for approval, particularly regarding the funder’s return;
• certification by the funder and law firm that they did not approach the funded party about the claim;
• after the event insurance (ATE) with robust anti-avoidance endorsements; and
• standard form agreements with built-in dispute resolution mechanisms.

The report also proposes mandatory enhanced costs budgeting and costs management for all collective proceedings, representative actions and group litigation, and that only specially authorised judges, with specialised training, should be allocated to manage such cases. 

Other recommendations

The report further covers:

• the need for urgent reform of the DBA Regulations 2013;

• treatment of portfolio funding and crowdfunding;

• costs issues arising from funded proceedings;

• legal expenses insurance reforms;

• the establishment of a standing committee on litigation funding to monitor and update the regime; and

• the creation of a public interest access to justice fund.

Summary: a win for funders, with strings attached

At the heart of the report is a strong signal to government: the PACCAR ruling must be reversed and fast. It is the CJC’s number one recommendation and one the industry is watching closely. As of now, there’s no indication the Ministry of Justice intends to act quickly, but the path is clearly marked.

Elsewhere, the CJC’s proposals strike a delicate balance. Funders will be relieved that arbitration funding is to be left alone, for now, and that the feared handover to the FCA has not (yet) materialised. Instead, the CJC recommends a ‘light touch’ regulatory framework, with the FCA to review its success in five years.

More good news for funders: the report rejects mandatory caps on returns, a key battleground during the consultation. The CJC concluded that caps are a ‘blunt instrument’ ill-suited to the variable risk profiles of funded claims. However, funder returns in consumer or class actions will still need court approval that they are ‘fair, just and reasonable.’

The proposed disclosure requirement is a tougher pill to swallow: this was opposed by many funders during the consultation process, who pointed out that defendants are not obliged to disclose insurers. The CJC was unconvinced.

In one of the more hard-edged proposals, funders who breach regulatory rules around control, including indirect influence over settlement, may see their LFAs deemed unenforceable and may also be made liable for adverse costs. The report calls for strict independence of decision-making to be preserved throughout the litigation process.

Conclusion

The CJC’s recommendations are striking for both their breadth and clarity. Rather than seeking to constrain litigation funding, as some had feared, the report acknowledges the role of litigation funding in widening access to justice, while also recognising the need for transparency, accountability and consumer protection. The call to urgently reverse PACCAR is a very welcome recommendation and should provide some much-needed stability in the funding market and for ongoing funded claims.

The challenge now lies in implementation. Whether this becomes the backbone for a stable, sustainable funding future will depend entirely on what happens next. If the government moves quickly, the report provides a solid foundation for long-awaited legislative reform. If it does not, uncertainty and stalled claims will persist and with them, continued pressure on the potential viability of litigation funding in England and Wales.

Copyright & permissions