UK litigation funding sector in crisis

The UK's position as a preeminent centre for dispute resolution is under threat, with a new report revealing significant shortcomings in its litigation funding sector compared to global competitors. Published on June 30 by the Angeion Group, the report titled Competitiveness at a Crossroads: Assessing the UK Litigation Funding Sector in a Global Market highlights the urgent need for governmental intervention to bolster the UK's competitiveness.

Assessing the frameworks of litigation funding across eight major legal jurisdictions, the report found that the UK now trails behind both Singapore and the United States, raising concerns about its viability and efficiency. It asserts there are "alarming warning lights on the dashboard" indicating the need for immediate action to address uncertainties stemming from the 2023 PACCAR judgment.

Lord Carlile of Berriew CBE, KC, who authored the report's foreword, emphasised that the current climate of legal uncertainty has adverse effects. He stated that "Legal uncertainty is never neutral in its effects. It does not merely inconvenience sophisticated institutional investors — it denies access to justice to the claimants who depend on funded litigation to hold powerful defendants to account." He underscored the importance of prompt legislative action to alleviate these issues, warning that delay would ultimately harm individuals and businesses reliant on the courts.

Jade Tess Weiner, Vice President of Group Actions at Angeion Group, noted the shifting landscape of international litigation funding, where "Capital is mobile." She warned that as competitors enhance their appeal through improved certainty and operational efficiency, the UK faces a critical choice: either strengthen its existing advantages or risk falling further behind. Jurisdictions like Singapore and New York have established themselves as preferred venues for funded disputes, reinforcing the urgent need for reform in the UK.

The report positions the UK in a precarious position, scoring amber on the criteria of certainty, viability, and efficiency, while its competitors boast green scores in key areas. Market participants voiced concerns, indicating that the sector is under extreme pressure, with reports of lawyers facing difficulties in securing funding. One broker highlighted receiving numerous cold approaches weekly from lawyers struggling to obtain funding, a stark contrast to the pre-PACCAR environment.

Although the UK Government has signalled intentions to reverse the PACCAR judgement, the proposed changes would only have prospective effects, leaving existing uncertainties unaddressed. The report advocates for a cautious regulatory approach, rejecting overly restrictive models and suggesting that the Government adopt a light-touch regulation style that builds upon the current self-regulatory framework managed by the Association of Litigation Funders. This path, it argues, is crucial for restoring the competitiveness of the UK's litigation funding market and ensuring access to justice for all claimants.