In a written statement on 17 December 2025 – the penultimate day before Parliament's Christmas recess - Justice Minister Sarah Sackman confirmed that legislation will be introduced relating to third party litigation funding.

This development follows the publication of a comprehensive review into the regulation of third party litigation funding published by the Civil Justice Council (CJC) in June. The principal recommendations of the CJC review were (i) that legislation should be introduced to deal with difficulties in enforceability of litigation funding agreements (LFAs) arising from the PACCAR decision of 2023, and (ii) that ‘light touch’ regulation of funders and funding agreements should be introduced by legislation. The legislation proposed by the CJC would distinguish between consumer and non-consumer agreements, introducing a more protective set of rules for the latter. Our article on the CJC’s final report provides further details.

The new written statement confirms that the government accepts the CJC’s first principal recommendation and will legislate on enforceability. It will do so prospectively – rejecting the retrospective approach of legislation moved by the previous government and rejecting the CJC’s recommendation to do so both prospectively and retrospectively.

There are likely to be two reasons for preferring the prospective approach. First that a significant proportion of the litigation funding market had changed its agreements in the aftermath of PACCAR to reflect the decision. Second that any justification for retrospective reform will have been significantly weakened by the passage of time, given that the new legislation would only take effect at least three, possibly even four, years after the judgment.

On the second main recommendation, the Minister states that the government “will introduce proportionate regulation of LFAs”. She does not unequivocally say that this will be achieved by legislation, although that may well be what the government has in mind. The reference towards the end of the statement to “legislation … [that] ensures that the litigation funding sector works fairly and efficiently for all” tends to suggest that the proportionate regulation planned by the government could be outlined in primary legislation (with secondary regulation addressing the detail).

The wording of the statement focuses on the regulation of agreements - LFAs - rather than on the regulation of the activity of litigation funding itself. It is suggested that this may be deliberate and, if so, it may point to a positive choice by the government to address the terms within, and operation of, funding agreements - whether those used by consumers or by commercial businesses – rather than to attempt to bring the activity of litigation funding within the scope of any statutorily regulated or reserved activities. In any event, the scope of the planned legislation will need to be carefully scrutinised.

As might have been expected, the only reference to timing is that the government will “introduce legislation when parliamentary time allows". We will have to wait and see if this legislation appears in the next King’s Speech, due in spring 2026.

The final paragraph of the statement touches on the remainder of the CJC’s recommendations. It says that those will be considered “once we have implemented these two changes” (ie points (i) and (ii) in the second paragraph of this article), at which stage it will “announce any further changes in due course". This is obviously very vague phrasing and provides no assurance that the government might take forward the wider recommendations made by the CJC.

It could therefore turn out that some of those - for example on matters such as security for costs, transparency in funded consumer claims, or the prohibition on funders controlling proceedings - might reappear rather more quickly as arguments in funded claims before the civil courts and the Competition Appeal Tribunal. And other recommendations – such as introducing mandatory costs budgeting in funded collective claims and developing a specific pre-action protocol for funded mass claims – might now be taken up by rules committees and court user groups.

A final point of note is there is no mention in the Minister’s statement of the review of the collective proceedings regime for competition claims currently being carried out by the Department for Business and Trade (DBT). This is slightly surprising given that litigation funding is critical in bringing collective competition claims and that the DBT's review raised specific questions about its operation and effect.

The necessary Parliamentary proceedings on provisions dealing with litigation funding - whether in a standalone bill or as part of a broader justice bill - and the drafting of accompanying secondary regulations could take as long as a further 18 months, during which the DBT’s thinking on collective proceedings will also emerge. Despite the Minster now confirming plans for legislation in her statement, throughout 2026 there will remain very many ‘moving parts’ in the ongoing debates on regulating litigation funding and re-evaluating collective proceedings.