On St George’s Day, the CJC published the outline of its review of the litigation funding sector, a quote from which appears below. The review team of six (two judges, two legal academics, a regulator and a costs silk) will be supported by a wider consultation group, applications for which are invited.

The work will be in two phases, with an interim report due this summer and a final report due in summer 2025. It is possible that the interim report could serve as a consultation paper / call for evidence to inform the final report. Given the timing of the latter, it is inevitable that Justice Ministers in post after the next general election will be considering its findings and recommendations.

The review is the latest element of what has been an evolving government response to the problem of the unenforceability of litigation funding agreements (LFAs) that resulted from the Supreme Court’s decision in July 2023 in the PACCAR litigation ([2023] UKSC 28).

First, late last year the government inserted a clause into the Digital Markets, Competition and Consumers Bill (DMCC) to remedy the enforceability of LFAs, but only in the narrow field of opt-out collective claims in the Competition Appeal Tribunal. This was met with some resistance when the DMCC Bill was debated in the Lords, with several high-profile former senior judges and lawyers pressing hard for a wider approach: ie one that would remedy enforceability for all claims and all types of LFAs.

The government initially resisted that but then changed tack in March, with the Lord Chancellor indicating his firm support for the wider approach and noting that third party litigation funding (TPLF or TPF) was critical in ensuring that a group of 555 sub-postmasters secured redress in the Horizon IT system litigation. In something of a legislative ‘hokey cokey’, the relevant clause was removed from the DMCC Bill and, after it had been re-drafted to deliver the now-preferred wider approach, was then re-introduced as the Litigation Funding Agreements (Enforceability) Bill (LFA(E)). At the same time, a formal review of the sector was floated by the government. As noted above, that now has been confirmed and the published terms of reference can be reviewed at Third Party Funding - Courts and Tribunals Judiciary.

It is worth noting that the review’s terms of reference refer to the possibility of making recommendations about “whether and how and, if required, by whom, TPF should be regulated”; which would be a significant change from the current self-regulatory approach. In his final report on civil litigation costs - published nearly 15 years ago - Sir Rupert Jackson had observed that “statutory regulation of third party funders… ought to be re-visited if and when the third party funding market expands.” The factsheet published with the LFA(E) Bill reports that “industry sources estimate the size [of the TPLF market in England & Wales] for 2023 to be between £1.5bn to £4.5bn.”

The Bill will be back before the Lords on 29 April and there remains some controversy over the approach adopted. In particular, the retrospective nature of the remediation of enforceability of LFAs is a very live concern and there are indications that the government has already received letters before action raising the prospect of judicial review proceedings on this aspect.      

Standing back, it is clear that TPLF is going to an important part of civil justice policy for at least the next two years. In the short term, the Bill will proceed and phase one of the CJC review will conclude. In the medium term, phase two of the review will be followed by its final report and in the longer term the prospect of statutory regulation of the sector looks far from fanciful, albeit that any decision to that effect will be for a new government.