The Civil Justice Council’s Final Report on Litigation Funding, published in June 2025, marks a watershed moment for the funding of civil claims in England and Wales. Prompted by the fallout from the Supreme Court’s decision in PACCAR, the report proposes primary legislation to reconfigure the regulation of third-party funding. It champions a rules-based regime that will tilt power from funders to lawyers, introduce “light-touch” regulation, and resolve long-standing legal uncertainties. But behind the careful prose lies a deeper struggle—between legal certainty and commercial freedom, and between the interests of litigants and the lawyers who speak for them.
It all begins with PACCAR. In July 2023, the Supreme Court held that most third-party litigation funding agreements were, in law, damages-based agreements (DBAs). That meant that unless they complied with the strict statutory regime applicable to DBAs, they were unenforceable. The judgment sent shockwaves through the funding industry. Many existing agreements were instantly compromised, and collective actions stalled while lawyers and funders scrambled to re-paper deals in compliance with a regime they had previously assumed didn’t apply to them.
In political terms, the decision triggered a swift and unambiguous response. The then-Conservative Government pledged to overturn PACCAR by legislation. The Litigation Funding Agreements (Enforceability) Bill was published in March 2024 and proposed to do precisely that—with retrospective effect. But before it could pass into law, the general election was called, Parliament was dissolved, and the Bill fell. The new Government decided to pause and wait for the Civil Justice Council to report.
Now it has. The Final Report, published in June 2025, is the second of two documents from the CJC Working Party. The Interim Report appeared in October 2024 and addressed the wider landscape of third-party funding in England and Wales. The Final Report returns to PACCAR and proposes a legislative response, but its ambition is broader: a comprehensive rules-based regime governing the operation, terms, disclosure and consequences of funding agreements.
At its heart is a single conclusion: the effect of PACCAR should be reversed by primary legislation, and all third-party funding should be regulated under a new statutory framework. The recommendation is that litigation funding agreements should be carved out of the definition of DBAs and treated separately. In short, the CJC agrees with the funders, the Government, and many others that PACCAR was wrongly decided. But unlike the Bill that would have reversed it in one line, the CJC proposes to replace the current vacuum with a fully-fledged system of regulation.
The inspiration, as so often, comes from Europe. The report is firmly grounded in the Principles Governing the Third Party Funding of Litigation published by the European Law Institute in 2024. In particular, it endorses Principles 4 to 12, which set out the fundamentals of responsible regulation: capital adequacy, anti-money laundering, transparency of funder identity, prohibition on control of litigation, and fair treatment of funded parties. These ideas now form the blueprint for a new “light-touch” regime in England and Wales.
But how light is “light-touch”? There’s a growing sense that the legal profession has captured this regulatory process. The proposals are replete with references to the responsibilities of funders and the rights of claimants, but curiously quiet on commercial freedom or market discipline. Counsel’s opinion will be required on every LFA where the funded party is a party to collective proceedings, a representative action or a group action or is a consumer. Courts will then review the terms of the agreement and the reasonableness of the funder’s return. Non-compliance may render the agreement unenforceable. A standing committee will collect data, monitor outcomes and propose future reform.
These are not merely regulatory nudges. They amount to a transfer of power, from funders to lawyers, and from the marketplace to the courtroom. It is a transition from contractual autonomy to supervisory control. What was previously unregulated, at least in form, despite the conclusion of the Supreme Court that litigation funding agreements, in a sense, were regulated by the Courts and Legal Services Act 1990 and its provisions on damages based agreements, is now to be governed by detailed and mandatory rules. Some of these will be legislative. Others will emerge through revised Civil Procedure Rules, applicable both in the courts and in the Competition Appeal Tribunal. Together, they herald nothing less than the arrival of a rules-based order for litigation funding.
The consequences are likely to be profound. With mandatory requirements around capital adequacy, disclosure and conflict management, there is ample scope for satellite litigation. Funders who fall foul of the new rules may find their agreements struck down and their recoveries extinguished. Class representatives will be required to disclose the funder’s identity and proposed return in every opt-out notice. Judges will be invited to scrutinise and approve terms which, up until now, were matters of private contract. There will be fertile ground for arguments, challenges, and appeals.
In commercial terms, the regime will almost certainly reduce the funders’ room for manoeuvre. Gone are the days when the return could be dictated by a funder’s appetite for risk or a claimant’s desperation for capital. The report explicitly rejects the idea of profit caps, but proposes instead a regime where the courts will decide, on a case-by-case basis, whether a return is “fair, just and reasonable.” That may be worse than a cap: it introduces legal uncertainty and opens the door to ex post challenges. It also amplifies the risk that funders will exit the market, or price their risk more conservatively, with predictable consequences for access to justice.
Nowhere is this tension more acute than in the debate over retrospectivity. The CJC recommends that the legislation to reverse PACCAR should apply both prospectively and retrospectively. That may be politically attractive, but it is legally fraught. As the case against retrospectivity makes clear, there is no real precedent in English law for retrospective legislation affecting private contractual rights in this way. Article 1 of Protocol 1 to the European Convention on Human Rights, which protects the peaceful enjoyment of possessions, is engaged. It is questionable whether Parliament can simply deem that what was unlawful is now, and always has been, lawful without at least acknowledging a departure from the A1P1 rights of one of the funded party. It may yet find itself challenged in Strasbourg or the domestic courts.
For now, the CJC’s view is clear. PACCAR was a mistake. It should be reversed. But not by a one-line Bill that simply changes the law. Instead, a full statutory regime should be enacted to bring third-party funding within the rule of law. This is the vision of the report: to embed the commercial practice of funding within a framework of legal accountability. Whether that vision will survive the rigours of political compromise remains to be seen. But it is already reshaping the terrain on which the next battle will be fought.
In the next article, we’ll examine the architecture of the new regulatory regime. If PACCAR was the spark, and this Report is the kindling, then the next step is to see how the fire will be controlled.