The Landscape of Litigation Funding in the UK

Litigation funding is transforming the legal landscape in the UK by enhancing access to justice. Recent research commissioned by the Legal Services Board (LSB) highlights the niche yet crucial role of litigation funding in legal services.

The Role and Impact of Litigation Funding

A comprehensive report by Professor Rachael Mulheron KC (Hon) of Queen Mary University, London, published on May 23 2024, underscores the significance of litigation funding. The report reveals that although litigation funding supports access to justice for individuals, small- and medium-sized enterprises, and corporations, it is limited in scope, backing only 3-5% of potential cases.

What makes litigation funding so appealing is that it enables claimants to pursue their day in court. The report suggests that litigation funding is poised to grow as a niche, yet vital, aspect of legal services, provided legislative changes are made to counteract the Supreme Court’s PACCAR decision, which rendered many funding agreements unenforceable.

The report identified 54 cases from 2019 to 2024 that utilised litigation funding. These cases include high-profile collective actions like the ‘diesel-gate’ vehicle emissions scandal and the successful claim by 550 sub-postmasters against the Post Office for the Horizon IT scandal. Litigation funding has also played a crucial role in challenging anti-competitive practices, such as those related to train fares and mobile phone contracts.

Upcoming Changes and Reviews

The release of this report comes at a crucial time, with the Civil Justice Council currently reviewing third-party funding. Their findings are expected next summer.

Neil Purslow, chair of the International Litigation Finance Association, highlighted the growing importance of litigation funding in the legal world. He pointed out that allowing claimants to recover funding costs from losing defendants could significantly benefit those seeking justice. This idea will be a key point in the upcoming review by the Civil Justice Council.

Legislative and Industry Developments

The report’s findings increase the pressure on future governments to quickly revive the Litigation Funding Agreements (Enforceability) Bill. John McElroy, vice president of the London Solicitors Litigation Association (LSLA), emphasised the importance of this research in showing why litigation funding is needed and why legislation should be passed soon.

The report underlines the critical role of litigation funding in providing access to justice. Ongoing legislative reviews and developments will shape the future of litigation funding, making it an essential part of legal services.

Litigation funding remains a niche but essential element of the UK’s legal services, facilitating access to justice. As the industry evolves and legislative frameworks adapt, litigation funding is set to play an increasingly significant role in the pursuit of justice. For those involved in or considering litigation, understanding these dynamics and the regulatory environment is crucial for understanding the complex landscape of legal funding.

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