Unpacking the CJC’s Final Report on Litigation Funding

The Civil Justice Council (“CJC”) has today published, 2 months ahead of schedule, its final report on Litigation Funding.

The report was commissioned in the wake of the PACCAR decision to address the issues which PACCAR caused around enforceability of Litigation Funding Agreements (or LFAs). The funding industry has been in limbo since the decision, a bill proposed by the previous Conservative Government, did not pass prior to Rishi Sunak proroguing parliament. The new Labour Government did not put the bill back on the table but instead, decided to await the outcome of the CJC review of litigation funding.

The report makes 58 recommendations covering areas such as the reversal of PACCAR; regulation of litigation funding; specific considerations for consumer claims; revisions to the court rules; portfolio funding; crowdfunding; the reform of CFAs and DBAs; Legal Expenses insurance; and a supplementary “Access to Justice” fund.

Key recommendations include:

1. reversing the UK Supreme Court's decision in PACCAR through legislation, clarifying that litigation funding is not a form of damages-based agreement (DBA)
2. a light touch regulation of Third-Party Litigation Funding consistent with the European Law Institute (ELI) Principles, with focus on capital adequacy, anti-money laundering, and conflict of interest provisions
3. standardisation of the terms of LFAs
4. ongoing capital adequacy requirements for funders
5. anti money-laundering to be applied to funders
6. codifying the prohibition on funders directly or indirectly controlling the litigation;
7. disclosure of the fact of litigation funding and the ultimate source of funding being disclosed as soon as possible
8. specifically in collective proceedings:
   1. KC advice to be provided to the funded party in collective proceedings; and
   2. the terms of the funding agreement should be provided to the court who should adopt an inquisitorial role
9. wider powers to the court to manage budgets and spend on funded cases
10. portfolio funding should be treated as a loan and regulated by the FCA
11. consideration of the development of a pre action protocol for mass consumer claims
12. a single regulatory regime for CFAs and DBAs
13. the allowance of the use of DBAs in collective opt out proceedings
14. the potential formation of an access to justice fund to use for the provision of early legal advice and alternative forms of resolution

The report recommends that there be no regulation of LFAs in arbitrations, that should be left to the individual tribunal if appropriate. Further, the report urges a 2 stage approach with legislation to overturn PACCAR being the immediate priority, with the remaining steps, including regulation, to follow.

The recommendations are likely to provide relief for funders following the much publicised PACCAR decision, but also facing a fresh challenge in the Court of Appeal in Guttman v Apple where the court has been asked to determine whether LFAs based on a multiple of invested sum are also unenforceable.

Eversheds Sutherlands’ litigation funding team can assist and advise in all aspects of litigation funding, whether you are a claimant, defendant or funder.

 View our Global Guide to Litigation Funding