By Nick Rowles-Davies

On 2 June 2025, the Civil Justice Council (CJC) published its Final Report on litigation funding in England and Wales. Commissioned by the Lord Chancellor in the wake of the UK Supreme Court’s landmark decision in R (on the application of PACCAR Inc and others) (Appellants) v Competition Appeal Tribunal and others (Respondents) [2023] UKSC 28.

The report is the most comprehensive examination of litigation funding in a decade. With 58 wide-ranging recommendations, the CJC proposes a new statutory regime for third-party litigation funding (TPLF), reforms to contingency fee structures, and foundational changes to the way civil justice is financed and accessed.

This article summarises the key findings of the Final Report, provides an overview of the 58 recommendations, and offers an analysis of the likely implications for funders, lawyers, consumers, and access to justice.

I. Background: The Fallout from PACCAR

The CJC’s review was prompted by the Supreme Court’s 2023 decision in PACCAR, which held that many litigation funding agreements (LFAs)—particularly those involving funder returns based on a share of damages—were damages-based agreements (DBAs) under the Courts and Legal Services Act 1990. This classification rendered many existing LFAs potentially unenforceable, especially in opt-out collective proceedings before the Competition Appeal Tribunal (CAT).

The government’s initial response included the Litigation Funding Agreements (Enforceability) Bill 2024, designed to reverse PACCAR. However, the Bill lapsed with the 2024 general election. The incoming government decided to await the CJC’s Final Report before proceeding.

II. Guiding Principles and Objectives

The report is anchored in four guiding principles:

1. Access to justice includes not only access to courts but also early legal advice and alternative dispute resolution (ADR).
2. The state must ensure sufficient public and private funding to support dispute resolution.
3. Funding mechanisms should reflect a holistic view—not merely funding litigation, but facilitating just outcomes.
4. Litigation must remain a last resort, not the default method for resolving disputes.

The Final Report thus places litigation funding within the broader ecosystem of civil justice, ADR, and public interest litigation.

III. Key Themes and Structural Overview

The report is divided into 12 substantive parts, covering:

• The PACCAR decision and the status of LFAs
• The regulation of litigation funding and related financial models
• The treatment of portfolio funding, crowdfunding, and “pure” funding
• Reforms to contingency fees (CFAs and DBAs)
• Cost budgeting and adverse costs exposure
• Proposals for an Access to Justice Fund and statutory reform

The CJC ultimately calls for the replacement of the existing fragmented and largely self-regulated regime with a new, purpose-built statutory framework.

IV. Summary of the 58 Recommendations

A. Reversing PACCAR and Clarifying the Legal Status of LFAs

Recommendation 1: Legislation should clarify that LFAs are not DBAs and are distinct from contingency fee arrangements. The PACCAR ruling should be reversed retrospectively and prospectively.

B. Improving Access to Justice and Oversight

Recommendations 2–3:

• Alternative mechanisms (e.g., regulatory redress schemes, class proceedings funds) should be considered to enable access for low-value collective claims.
• A Standing Committee on Litigation Funding should be created under the Civil Procedure Rule Committee (CPRC) to monitor data and trends.

C. Statutory Regulation of Litigation Funding

Recommendations 4–6:

• Replace the current self-regulatory model with a statutory regime.
• Claims management services should fall under the new regulatory scheme.
• Arbitration funding should remain outside the regime and left to arbitral centres.

D. Structure and Elements of Regulation

Recommendations 7–16:

• The Lord Chancellor should have power to regulate funders via secondary legislation.
• Core regulatory elements should include:
  • Case-specific capital adequacy
  • Anti-money laundering rules
  • A bar on funder control of litigation
  • Early disclosure of funder identity
  • Conflict-of-interest rules
  • Independent dispute resolution
  • Breaches should render LFAs unenforceable, subject to judicial discretion

E. Enhanced Consumer Protections and Collective Actions

Recommendations 17–23:

• Funders in consumer and group litigation should be subject to a regulatory Consumer Duty.
• Funded parties must receive independent legal advice (ideally from King’s Counsel).
• Standard terms for LFAs should be created.
• Without-notice court approval of LFAs in collective actions should be required.
• Funders must certify they did not solicit funded parties.

F. Alignment of Court Rules with Funding Regulation

Recommendations 24–27:

• Courts should manage pre-action funded litigation on application.
• Courts must assess if regulatory redress schemes are viable alternatives.
• CPR Part 19 should be aligned with CAT Rules.
• CAT and CPRC should work together for consistency.

G. Portfolio Funding and Litigation Loans

Recommendations 28–31:

• Portfolio funding should be treated as loans and regulated by the FCA.
• The impact on the legal profession should be investigated.
• Co-regulation by the FCA and SRA may be appropriate.
• Professional guidance and training on portfolio funding must be improved.

H. Crowdfunding and “Pure” Funding

Recommendations 32–37:

• Crowdfunding for profit should be regulated as TPLF.
• Non-profit crowdfunding should be separately regulated to ensure:
  • Funds are held in trust
  • Donor identities are verified
  • Surplus funds are returned or donated to the Access to Justice Foundation
• CPR should codify the treatment of pure funding in line with case law.

I. Costs, Budgeting, and Arkin Cap

Recommendations 38–44:

• Pre-action protocols for mass claims should be developed.
• Costs budgeting should be mandatory for all funded group actions.
• Only specially trained judges should manage funded claims.
• Funding costs should be recoverable only in exceptional cases.
• Arkin Cap principles should be codified in the rules.
• No presumption of security for costs unless funders breach capital requirements.

J. Reforming CFAs and DBAs

Recommendations 45–56:

• Introduce a single, simplified contingency fee regime.
• Remove DBAs and CFAs from claims management regulation.
• Abrogate the indemnity principle in contingency and LFA cases.
• Permit judicial discretion to uphold non-compliant fee agreements.
• Move responsibility for regulation from MoJ to CPRC.
• Remove caps on lawyer returns in commercial DBAs and CFAs.
• Permit DBAs in CAT opt-out proceedings, subject to judicial approval.

K. Legal Expenses Insurance

Recommendation 57:

• Implement Jackson Review recommendations to encourage LEI uptake, particularly home and employment insurance policies.

L. Access to Justice Fund and Legislative Reform

Recommendations 58–59:

• Introduce an “Access to Justice Fund” funded by a small levy on profits from litigation funding and contingency fee agreements.
• All legislative reforms should be consolidated into a single statute: a proposed Litigation Funding, Courts and Redress Act.

V. Analysis and Commentary

1. A Long-Overdue Statutory Framework

The current regime—a mix of dormant statutory provisions, common law doctrines, and voluntary self-regulation—is clearly inadequate. The CJC rightly identifies the PACCAR decision as the catalyst to move toward a coherent regulatory model. Its proposed light-touch statutory regime strikes a balance between market freedom and consumer protection.

2. Preserving Flexibility While Ensuring Accountability

The proposed framework recognises the diversity of litigation funding structures—from commercial funders to crowdfunding to portfolio-backed law firms. The differential regulation model (lighter for commercial parties, stricter for consumers and collective actions) is pragmatic and targeted.

3. Strong Consumer and Class Protections

The recommendations rightly focus on informed consent, transparency, and independent advice. Court approval and enhanced disclosure in collective actions will help protect class members—particularly where the funder’s return is high.

However, the rejection of caps on funder returns may invite criticism. The report argues that caps would distort risk-based pricing and reduce access to capital. Nonetheless, increased scrutiny and transparency will likely exert market pressure on excessive returns.

4. A New Era for Portfolio Funding

The report marks the first time portfolio funding has been directly addressed in UK civil justice reform. Treating it as a financial loan (subject to FCA oversight) is consistent with its commercial nature, but the CJC is wise to recommend further investigation into its effects on the legal profession and ethical boundaries.

5. Proactive Role for Regulators

By empowering the Lord Chancellor and CPRC—not the FCA—to implement the initial regime, the CJC preserves agility and proportionality. But the five-year review clause is a prudent hedge: if the light-touch model fails, the FCA may need to step in.

6. Legislative Hurdles and Implementation Challenges

Despite its robust proposals, the report’s impact will depend entirely on legislative action. The previous Bill to reverse PACCAR failed due to election timing. The proposed comprehensive statute will require political will, parliamentary time, and careful drafting.

The retrospective element of the PACCAR reversal will also face legal and political scrutiny, though the CJC has attempted to lay out a justification.

VI. Conclusion: A Defining Moment for the Industry

The CJC’s Final Report is a landmark document. It offers a forward-looking, balanced, and highly detailed blueprint for the future of litigation funding in England and Wales. For funders, it provides a pathway to legitimacy and certainty. For consumers and claimants, it promises stronger protections and access to justice. For government, it poses an urgent legislative challenge—but one that, if taken up, could shape the civil justice system for decades to come.

The CJC has done its job. It is now up to Parliament to act.