The Civil Justice Council’s Final Report does not stop at regulation. It also proposes significant changes to the rules of court, case management, and costs recovery. Recommendations 24 to 27 suggest expanded judicial powers over litigation funding agreements, while Part 8 tackles costs budgeting and the contested issue of funder recoverability. The idea that funding costs might be recoverable in “exceptional” cases invites inevitable argument. Courts will be asked to test the boundaries, and satellite litigation will follow. This article explores the CJC’s proposed reforms to process and costs, and asks whether they promise clarity—or just more complexity.
Parts 5 and 8 of the Final Report reveal that the Civil Justice Council’s ambition extends well beyond regulation. It proposes fundamental change to the rules of court and to case management itself, shifting control over litigation funding agreements from private negotiation to judicial oversight. The impact of that shift may be profound. If adopted, these recommendations will reshape how cases are conducted, how costs are controlled, and what may ultimately be recovered.
Recommendations 24 to 27 sit in Part 5. Their focus is on procedural reform. Recommendation 24 suggests that the Civil Procedure Rules should be amended to require disclosure of litigation funding agreements to the court in certain categories of cases—specifically, all opt-out collective proceedings, and any case where the court is asked to approve the terms of the funding. The identity of the funder and the existence of funding must be disclosed in every case, even if the terms remain confidential.
Recommendation 25 goes further: where approval of the agreement is required, the court should be asked to rule on whether the funder’s return is “fair, just and reasonable.” The test is undefined. It invites value judgments by judges about risk, proportionality, and reward. It may expose funders to judicial trimming of their expected returns, even after they have taken on substantial financial risk.
Recommendation 26 would allow the court to disallow or adjust the funder’s entitlement in cases of serious non-compliance with the new regulatory regime, or with applicable conduct rules. This would operate independently of enforceability under contract law. It gives the court a new supervisory role over funding terms, potentially long after the agreement was formed.
Finally, Recommendation 27 invites further consideration of whether all litigation funding agreements in opt-out proceedings should be subject to judicial approval. That would bring funding into line with settlement, which already requires approval in such proceedings. But it also significantly expands the court’s case management burden.
Together, these four recommendations create a more interventionist judicial role in the litigation funding landscape. The court will become not just a forum for adjudication, but a gatekeeper for funding fairness. While this may provide protection for claimants, particularly in collective actions, it raises difficult questions about the boundaries of private contract and judicial discretion.
In Part 8, the focus shifts to costs and funding. Recommendations 37 to 44 reflect a deep concern with how the cost of litigation is managed, particularly in funded cases. Recommendation 37 proposes that a new pre-action costs management process be considered. This is novel. At present, costs management begins once a claim is issued and allocated. The proposal would push budgeting into the pre-action stage, where no claim form exists, and judicial scrutiny would be based on preliminary exchanges.
That would be an unprecedented shift. Costs budgeting is already a demanding and contested exercise. Doing it before proceedings even begin raises practical and conceptual difficulties. How are budgets to be managed where the pleadings are not yet settled, evidence untested, and timetables fluid? Who will bear the cost of pre-action hearings? And what sanctions will apply if the parties disagree or the case later evolves?
Recommendations 38 and 39 call for more consistent application of budgeting in group litigation and collective proceedings. Recommendation 40 suggests a new approach to the treatment of funder costs within the budgeting process. It seeks greater transparency and clearer guidance for judges about how funding costs should be treated when managing budgets.
The most controversial proposal comes in Recommendation 41: that the costs of litigation funding should be recoverable in “exceptional circumstances.” This would be a sea change in English costs law. The position since the LASPO reforms has been that the costs of litigation finance—whether in the form of success fees or ATE insurance premiums—are not recoverable from the losing party. That position was confirmed by the Supreme Court in Hirachand v Hirachand [2024] UKSC 44, where it was held that a success fee could not be included as part of a financial provision award under the Matrimonial Causes Act 1973. The rationale is consistent: these are costs voluntarily incurred to enable litigation, and not properly recoverable as costs of the action.
Yet in Essar Oilfields Services v Norscot Rig Management [2016] EWHC 2361 (Comm), a High Court judge upheld an arbitral award that allowed recovery of litigation funding costs under the general discretion conferred by section 59 of the Arbitration Act 1996. The decision did not go to the Court of Appeal. It has been doubted, and rightly so. It sits awkwardly with established costs principles. It creates a divergence between arbitration and court proceedings that is hard to justify. And it blurs the line between commercial risk and compensable loss.
The CJC’s recommendation imports that logic into the court system. The problem, of course, is that “exceptional circumstances” is an open door. Every case will now be argued to be exceptional. Every claimant with funding will assert that their case presents unique features justifying departure from the general rule. Satellite litigation will inevitably follow.
Judges will have to decide whether the funding was necessary, whether it was proportionate, and whether the case is truly unusual. That will involve detailed evidence about the market for funding, the claimant’s options, and the terms of the deal. It will raise precisely the kind of mini-trials on costs that budgeting was designed to reduce.
There is also a conceptual inconsistency. If funding costs can be recovered in exceptional cases, why not success fees? Why not ATE premiums? These are all elements of litigation finance. They often work in tandem. A claimant may use third-party funding to pay for the premium. If one cost is recoverable, the logic for excluding the others becomes strained. The line becomes arbitrary.
The Report attempts to manage this tension by limiting recoverability to funder costs only, and only in rare cases. But that boundary will not hold. Once an exception is created, it will be tested. And if a funder’s return is recoverable, it is difficult to see why a solicitor’s uplift should not be treated the same way.
These are not idle concerns. The history of English costs law is littered with unintended consequences. Conditional fee agreements were meant to solve the problem of access to justice. They did—but they also created the costs wars. The LASPO reforms were meant to restore balance. They did—but they also curtailed recoverability for many legitimate expenses.
If the aim is certainty, the path the Report proposes is a risky one. It invites complexity, discretion, and litigation over threshold tests. It may deter funders, not because the costs are unrecoverable, but because recovery will be unpredictable and hard-fought.
There is merit in the idea that funding should be more transparent and better integrated into the litigation process. But recoverability is a step further. It changes incentives. It changes how funding deals are priced. And it raises difficult questions about fairness between winners and losers.
The Civil Justice Council seeks to bring coherence to a fragmented area. That is a worthwhile aim. But in this part of the Report, coherence may give way to confusion. The rules of the game are changing. But whether they will be more easily played—or simply more often litigated—remains to be seen.