The litigation funding debate has moved on from whether reform is coming. The government has now made clear it intends to introduce a regulatory framework for third-party funding. The more difficult issue is what that framework will actually look like. This matters because funding is no longer a niche commercial topic. It increasingly sits inside access to justice, class actions, group claims and the practical economics of high-value litigation.
On the face of it, regulation will improve transparency and protect claimants and it is welcomed by many in the industry, especially in the aftermath of SSB’s fall leaving many clients stuck and stranded with bills. But funding is useful because it helps claimants bring cases they could not otherwise afford. If regulation becomes too restrictive, access could be reduced. If regulation remains too light, concerns about control, returns and accountability continue. The balance is difficult because both sides of the argument contain some truth.
The temptation is to reduce everything to the PACCAR issue. That case created urgency by unsettling the enforceability of funding agreements in some contexts. But the conversation has already moved beyond technical repair. Ministers are now talking more broadly about fairness and transparency. Once reform enters that wider territory, the policy choices become much harder. Questions arise about disclosure, capital adequacy, conflicts, control over litigation strategy and the level of claimant protection needed in different kinds of case.
For business readers, the commercial significance is obvious. The funding market depends on legal certainty. Funders, claimant firms and defendants all need to know the rules of the road. Unclear reform may keep uncertainty alive rather than end it. A stable framework would allow viable claims to proceed while making the market more intelligible to judges, claimants and opponents alike.
The sensible position is to neither panic nor jump for joy. The market does need clearer rules after PACCAR. But regulation should be judged by whether it improves confidence without choking off the capital which makes many large claims possible in the first place. That is the challenge ministers now face. The headline commitment to regulate is the easy part. Drafting a regime which protects claimants and still preserves effective access to justice is the real test.
Author: TOR
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