The calling of the general election and the consequent dissolution of Parliament caused the Litigation Funding Agreements (Enforceability) Bill (LFAE Bill) to lapse, along with several other Bills that had not made sufficient Parliamentary progress to secure Royal Assent via the pre-election ‘wash up’ process. The Bill’s web page was updated on 29 May and now states that “The 2023-24 session of Parliament has been prorogued and this bill will make no further progress.”

The loss of the Bill would appear to mean that any consideration of regulatory issues arising within the litigation funding sector will, over the short to medium term at least, take place outside Parliament and as part of the Civil Justice Council’s two-phase review. Its terms of reference, which were published before the election was announced, require the review to examine options for the formal, structural regulation of the sector and to consider more detailed matters such as whether and if so how the levels of return within agreements should be controlled and how to deal with potential conflicts between funders, funded parties and legal representatives.

It is very likely that the interim report of the review, which should be published in the next few months, will serve as a form of consultative exercise via which the review team will seek views on key issues. The submissions it receives in response and the outputs from any other stakeholder engagement (such as seminars or briefings) should permit the review team to formulate recommendations in the second phase of its work, noting that its final report is required “by summer 2025”.

Given this timetable, any new legislation that the review might recommend affecting the sector would be highly unlikely to be in place before the first half of 2026, at the earliest. That, along with the recent loss of the LFAE Bill, might suggest a two-year period in which the current uncertainties about enforceability of funding agreements in the sector could remain unresolved.

A gap of that length, however, does not appear realistic for several reasons. First is that the interim report of the review will keep the policy spotlight on the funding sector for the next few months. Second is that several appeals on enforceability are due to heard by the Competition Appeal Tribunal in the autumn and may provide some clarity on the point. Third, and perhaps most significantly, is that it seems unlikely that the political interest in the sector – which sky-rocketed with the news that litigation funding secured compensation for postmasters and was key to exposing the Horizon scandal – looks unlikely to abate.

Both the LFAE Bill and an earlier, narrower solution (which had been inserted into the Digital Markets, Competition and Consumers Bill) were debated extensively in the Lords and secured broad cross-party support, something that might point to the possibility of a new government quickly taking forward proposals based on those provisions (and it may come under some pressure from stakeholders to do so in any event, as this article in the Law Society Gazette emphasises).

It’s impossible to predict what might happen and when. That said, it is clear that it will be for a new administration to decide if it is prepared to act quickly on the enforceability of agreements and then, potentially, act again in eighteen months in response to the CJC’s recommendations in respect of the future regulation of the sector and about certain aspects of individual litigation funding agreements.