Context: The third-party litigation funding industry has grown significantly in recent years, with high-profile players such as Fortress Investment Group having deployed roughly $6.6 billion into legal assets, around $2.9 billion of which has gone into IP litigation (October 16, 2024 Bloomberg article). But the industry has also begun to receive major backlash. Most notably, in the U.S., Senators Thom Tillis and Kevin Hern are targeting litigation funders with proposed legislation that would increase taxes on litigation finance returns. The bill, named the “Tackling Predatory Litigation Funding Act”, would bring “much-needed transparency and accountability by taxing these profits and deterring abusive practices that undermine the integrity of our courts”, Mr. Tillis has claimed (May 22, 2025 Thom Tillis press release). Many litigation funders are concerned this bill could upend their business model. In the EU, the European Parliament called on the European Commission (EC) to propose a regulation for litigation funding in September 2022. But there is not much momentum behind that push, and the EC has not yet decided whether to regulate the sector.
What’s new: The UK’s Competition Appeal Tribunal (CAT) chairman, Hodge Malek KC, told attendees of the 2nd Annual LF Dealmakers Europe (May 12, 2025 ip fray article) in London yesterday that he sees “the role of funders as central in the whole collective proceedings regime”. The court, he added, is “not hostile at all [and] wants the best for everyone, including the funders” (June 24, 2025 LinkedIn post by ip fray).
Direct impact and wider ramifications: This is positive news for the litigation funding community, with Mr. Malek essentially encouraging them to take part in UK litigation. An attractive UK legal system is especially positive for those in the U.S., who may be concerned about the potential new Tillis bill, and have started looking to Europe as they face being forced out of the U.S. market. It is also positive for those litigating in Europe (including at the Unified Patent Court), as those players would no doubt look to invest capital there instead. European funders could see increased competition, but this also means smaller companies eager to litigate will gain access to a whole new pool of funders.
At the 2nd Annual LF Dealmakers Europe in London yesterday, Mr. Malek emphasized the CAT’s role on the global class action regime stage. While its richest experience comes from opt-out class actions at the Collective Proceedings Order (CPO) stage, some cases, such as McLaren and Merricks, are now finally getting to the judgment and settlement stages.
In the UK, the CAT is responsible for handling appeals filed against Competition and Markets Authority decisions, as well as by regulators such as Ofcom and Ofgen. More notably, it is where class action lawsuits are filed in the first instance. The CAT has become an attractive venue for such disputes, as it operates both an opt-in and opt-out system, which grants greater flexibility in how such cases are filed (although opt-out is currently only available for competition law claims).
Mr. Malek believes all of the cases it has handled so far under the collective proceedings regime have reached fair outcomes, thanks to a “constructive approach” employed by all those involved, including funders:
“By and large, [funders] have been willing to be flexible, learn lessons and be constructive because if we have a system that is perceived as being fundamentally for the benefit of class members and consumers, it’s going to be squeezed out. But if we have a system that does not give funders a proper rate of return, when you look at the contrasting interests, we at the CAT have a very important responsibility.”
Mr. Malek noted that the level of scrutiny on funders in the UK has intensified at the certification stage, but he himself regards the role of funders as “central” and the CAT wants to be fair to everyone, and “not kill off the industry”.
The CAT chairman added that it is “common sense” for funders to want to withdraw from a market if they are unable to make an adequate rate of return across their portfolio. But, he said, funders are “responsible” and they are “doing their best to have and support a credible system”.
Potential regulation for EU litigation funding
After the European Parliament asked the EC to propose legislation in September 2022, the EC conducted a mapping study that would take stock of the litigation funding regulatory landscape in the EU. That study, published in March, found that such regulation is “largely absent” (March 2025 European Commission study (PDF)).
It also found that while the majority of respondents (58%) think litigation funding should be regulated, most views on litigation funding were positive, with only 17% believing litigation funding has only negative effects. Some Member States, however, such as Germany and Italy, are advancing their own rules.