Stewarts responds to Civil Justice Council review of litigation funding

The Civil Justice Council (CJC) consultation on their review of litigation funding in England and Wales closes on 3 March 2025. Stewarts, the UK's largest disputes-only law firm, has submitted a comprehensive response drawing on the firm's experience in high-value and complex disputes.

Stewarts welcomes the CJC's review of third-party litigation funding (TPF), including alternative forms of fee, funding and insurance arrangements. Our response recognises that the CJC's review raises numerous important themes to be addressed in the coming years. However, we urge the CJC and the Ministry of Justice (MoJ) not to allow the exploration of those broader themes to further delay taking immediate action to resolve the two most pressing issues:

1. corrective legislation similar to the Litigation Funding Agreements (Enforceability) Bill to reverse and end the uncertainty and ongoing satellite litigation caused by PACCAR, and
2. the long overdue amendments to the regulation of Damages Based Agreements (DBA), as proposed by the DBA Reform Project in 2019.

The full response (c. 36,000 words) is available to download below.

The importance of third party funding

TPF can provide effective access to justice, including equality of arms for claimants who would not otherwise get redress to which they are entitled; it also encourages good corporate behaviour through the funding of claims for mass redress for breach of the law.

The legal services sector is a key player in the British economy, generating £74.4 billion in turnover and £57.8 billion in gross value added in 2021. The availability of TPF plays an important role by enhancing England and Wales' attractiveness as a jurisdiction for disputes. The CJC ought to make recommendations that maintain England and Wales as the jurisdiction of choice for companies to nominate in their contracts, and turn to for disputes when they arise.

TPF is also a business-friendly option for some corporate clients, enabling them to apply their finances to maintain or develop their core business rather than facing the difficult choice of diverting those funds to pursue litigation or arbitration. TPF has assisted over 1,350 of our commercial disputes clients to secure over £200 million of funding, working with 16 different funders, pursuing claims for damages totalling in excess of £9.5 billion.

Recommendations on changes to funding regulation

The PACCAR judgment (classifying TPF agreements as DBAs) has been hugely disruptive to the TPF market and does not reflect the legislative intent behind the DBA Regulations 2013, nor the preceding reports issued by Lord Justice Jackson.

Relevant issues to consider on whether the current self-regulatory framework for TPF is sufficient or could be improved include:

• How to ensure all funders abide by a common Code of Conduct and whether self-regulation by the Association of Litigation Funders (ALF) is still appropriate;
• Whether any regulation of TPF should be limited to funding of claims for consumers, similar to the authorisation required from the Financial Conduct Authority under the Financial Services and Markets Act 2000 for making regulated mortgage loans and for consumer credit lending.
• Monitoring and enforcement of either or both of the above, and who should perform this and how.

As a starting point we endorse the adoption of the European Law Institute'sPrinciples Governing the Third Party Funding of Litigation (ELI Principles), subject to some exceptions and observations. We also agree with the authors of the ELI Principles that there is far more talk about the risks or harms that may arise from TPF than there is evidence of actual harm.

Other recommendations made in the response include that:

• Any regulation of TPF ought not to include caps on funders' returns, as that would inevitably result in more cases being viewed as economically unattractive to funders and may produce perverse outcomes.
• Control of funders' fees is best achieved by requiring the lawyers advising funded parties to fully engage in the provision of advice on funder selection and terms, or steer their clients to seeking discreet independent advice of that type.
• In consumer class actions, notably Competition Appeal Tribunal opt-out collective proceedings and CPR 19.8 representative actions, the control of funder returns is better achieved by the courts applying suitable procedural rules to the specifics of the cases in question, rather than the blunt tool of caps.
• Restrictive regulation of English-seated arbitration must be avoided, as it would risk diminishing the attraction of England as the jurisdiction of choice for many parties concluding contracts with arbitration provisions.
• To enhance consumer protection and to align with existing regulatory requirements for after-the-event (ATE) insurance for consumers, there should be equivalent obligations on funders to provide in advance a Funding Product Information Document (FPID) to clearly and concisely set out the key terms.
• Any definition of a funding agreement should exclude concepts such as DBAs and conditional fee agreements (CFAs), which are already separately regulated.
• In accordance with the overriding objective for civil claims and in order to encourage early settlement, parties reliant on any form of funding agreement should in certain meritorious circumstances be able to claim from the opponent an additional sum of up to 100% (1x) of their total recovered base legal costs, unless the court concludes that would be unjust.

Our response also notes that litigation costs and related funding costs would be significantly reduced if the courts were better resourced and hence able to (i) list hearings more swiftly, (ii) more actively and robustly case manage cases, and (iii) consistently deliver timely judgments. That would also enhance the reputation of the English courts and help maintain the significant contribution of the legal services sector to the UK economy.

The Stewarts response has been authored by a dedicated team drawn from across our practice areas, led by Risk and Funding partner Julian Chamberlayne alongside Tom Matusiak, Olivia Amos and Jenny Leppard from our dedicated Knowledge team.

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