Context: Litigation funding has faced growing scrutiny worldwide, including – most notably – in the U.S., where Senators Thom Tillis and Kevin Hern are targeting litigation funders with proposed legislation that would increase taxes on litigation finance returns. Many litigation funders are concerned this bill, which is named the “Tackling Predatory Litigation Funding Act”, could upend their business model. In the UK, the Supreme Court ruled in July 2023 that certain types of litigation funding agreements (LFAs) were a form of damages-based agreement (DBA), calling the validity of a significant number of such agreements into question (including those for collective proceedings in the UK Competition Appeal Tribunal (CAT). Following this, three significant events occurred:
- Legislation was brought forward, the LFAs (Enforceability) Bill 2024, to clarify that such funding agreements were not DBAs. That bill fell with the call of the UK’s general election in July 2024.
- The Lord Chancellor requested advice from the Civil Justice Council (CJC), which published its final report on recommended litigation funding regulation earlier this month (June 2025 CJC final report (PDF)).
- Three appeals were filed in the CAT challenging the enforceability of the new form multiples-based LFAs, arguing that these should also be classified as DBAs.
What’s new: If the LFA (Enforceability) Bill 2024 bill does not get in place soon, and the CAT decides to side with the Supreme Court’s findings, much like if the Tillis bill is passed in the U.S., this could be “the end of funding”, said Susan Dunn, Chair, Association of Litigation Funders, on a panel entitled “is regulation going to kill us all?” at the 2nd Annual LF Dealmakers Europe (May 12, 2025 ip fray article) in London on Wednesday.
Direct impact and wider ramifications: It will be interesting to see what the CAT’s ultimate decision will be, considering CAT chairman Hodge Malek KC’s keynote on day one of the LF Dealmakers event, during which he said he sees “the role of funders as central in the whole collective proceedings regime” (June 25, 2025 ip fray article). While those who are concerned about the Tillis bill might be driven out of the U.S., the CAT’s decision and the speed of the passing (or not passing) of the proposed legislation will be key deliberation factors for funders looking to invest capital in Europe. If the decision is in line with the UK Supreme Court’s findings, this could be positive news for those litigating in Europe (including at the Unified Patent Court).
At the 2nd Annual LF Dealmakers Europe in London on Wednesday, Ms. Dunn noted how the life of a funder is “mostly disappointment”:
“Things come in at much less than they were going to be and cost much more than they said they were going to be… yet it seems that then the funder is characterised as a slight baddie in all of this.”
In the U.S., for example, the Tillis bill allegedly says it is trying to deal with predatory financing from foreign bad actors, which is “all nonsense but that’s how they gain traction”, she said.
Ms. Dunn’s bill received massive support at all levels by the time it was shelved due to the UK’s General Election last July, and while she described it as a “labyrinthine process”, it will cost zero pounds to implement and is “totally in sync” with the current government’s growth plans. However, she warned, if the CAT upholds the enforceability of the new form multiples-based LFAs before the bill is passed, much like if the Tillis bill is successful in the U.S., “that is the end of funding”.
“Therefore, it is absolutely critical to get it right,” she said.
Light touch regulation?
Polly O’Brien at Schulte Roth + Zabel, who moderated the panel, noted that initial media reactions to the CJC’s final report were that it was “light touch” regulation. But she is not convinced of this.
She specifically highlighted the recommendation around disclosing the ultimate source of funding, calling it “bizarre”.
Ms. Dunn agreed with these views, noting that there is an enormous amount of prejudice about what funding is, and the risks that exist among those adjudicating on the outcome of a case. “It influences their decision-making when they see a funder involved – it should be on the merits, but it still isn’t always,” she said.
While generally pleased that the CJC also urged the resolution of the PACCAR issue, because of the detrimental effect it is having on litigation funding, Ms. Dunn questioned who would ultimately be the appropriate body to monitor, police, and enforce litigation funding regulations:
“It is hard in a country where we have no money and lack the resources to understand the issues – it is one example of what is a fabulous idea, but it’s unclear how it will get done.”
Fellow panelist Kenny Henderson of CMS, who believes it is important for litigation funders to be regulated, praised the CJC’s report for being “ambitious”, “impressive”, and indeed full of “light touch regulation” recommendations.
Although Mr. Henderson sympathizes with funders a lot, the CJC calling for rules is due to two main issues:
- In group litigation it’s not the traditional lawyer-client relationship (although with opt-outs, you have a class representative, so to a degree you have clients who can give you instructions); and
- In large opt-ins, you have to cede a degree of control to a steering group – it’s unworkable otherwise – although there should be higher obligations on those law firms.
But he agreed with Ms. Dunn’s points about the UK’s judiciary prejudice issue:
“The judiciary has a lot of pride in the English judicial system, but some of them do think it is not appropriate to make lots of money and this perception does influence folks.”