Civil Justice Council Review of Litigation Funding

Sarah Sackman Excerpts

Wednesday 29th October 2025 Westminster Hall

[The Minister of State, Ministry of Justice (Sarah Sackman)]

It is a pleasure to serve under your chairship, Mrs Harris. I thank the right hon. Member for Skipton and Ripon (Sir Julian Smith) for securing a debate on this very important subject. It gives me an opportunity to cover three of my favourite themes: consumer protection, access to justice and growth, especially as it is delivered by the very successful legal services sector in this country.

We are here to discuss the Civil Justice Council’s review of litigation funding, which was published in June. As others have said, litigation funding refers to the mechanism by which litigation is privately funded in England and Wales. Third-party funding is where a party unconnected to a dispute, most often a financial institution, funds the cost of the legal action in return for a share of any damages awarded. As others have observed, this performs two functions: a social function and an economic function. Third-party funding is an essential tool in ensuring access to justice for many. It enables those who would not otherwise be able to afford to litigate—ordinary people, the small businesses referred to— to assert their rights before a court of law, against often far better resourced opponents, often large corporations and institutions.

Without third-party funding, as others have noted, the sub-postmasters would not have been able to bring their landmark civil claim against the Post Office. Those individuals without the financial means or legal clout to bring a claim themselves, were able to secure compensation for their losses as a result of third-party litigation funding. Such funding has also been used to support equal pay cases, environmental challenges, consumer claims against multinational companies regarding data breaches, and the other sorts of cases mentioned today.

As the right hon. Member for Skipton and Ripon (Sir Julian Smith) notes, this also makes a huge economic contribution. Along with the quality and calibre of our judiciary and legal services, third-party funding is an important factor in attracting international business to England and Wales as a jurisdiction of choice. That is because third-party funding is also used in high-value commercial cases, where there is a significant financial imbalance or where parties do not wish to use limited capital resources on legal proceedings.

It is important for the House to recognise that third-party funding plays a critical role in supporting the attractiveness of our jurisdiction as a global hub for commercial litigation and arbitration. Legal services contributed £42 billion to the economy last year. I am happy to be their greatest champion, but it is fair to say that the UK Supreme Court’s judgment in the PACCAR case has created a degree of uncertainty for funders and litigants alike.

As we have heard, the case concerned litigation funding agreements—LFAs. The Supreme Court held that third-party litigation funding agreements were damages-based agreements. The ruling rendered many such LFAs unenforceable, by bringing them into the scope of the regulatory regime for damages-based agreements. As others have noted, that has created a degree of uncertainty. There is a concern and very real risk that funders are beginning to pivot away from London, England and Wales to look at other jurisdictions, such as New York, Paris and Singapore, more favourably. In short, that is not good for UK plc.

The PACCAR judgment and the report of the Civil Justice Council that followed present an opportunity for the sort of debate we are having. What would it look like to reverse PACCAR? Do we want to go back to exactly what the regime looked like before? Can we evolve an even better regime, which provides the right regulatory balance, ensuring access to justice, and that damages-based agreements work for client and funder alike? How do we develop that? For that reason, the Government have taken time to ask the CJC to conclude its work, and we are considering carefully how to achieve that balance.

Third-party funding is currently subject only to self-regulation via the Association of Litigation Funders’ code of conduct. I welcome and echo the invitation by the right hon. Member for Skipton and Ripon to those who are not currently subject to the code’s ethical and operational standards to seize the opportunity to bring themselves within what is currently a voluntary regime.

Despite litigation funding’s importance to effective access to justice, not all feel that current third-party funding arrangements always work in the client’s best interest, as my hon. Friend the Member for Burnley (Oliver Ryan) pointed out. Some have questioned funders’ role and level of control in legal proceedings. Those weaknesses in the pre-PACCAR regime are ones we recognise and want to take time to consider, so that we can ensure that third-party funding works for all.

In the light of the judgments and those concerns, the Civil Justice Council, an advisory body chaired by the Master of the Rolls, has conducted a thorough and learned review. It looks at this issue and the wider ecosystem for third-party litigation funding and its regulation. The scope of the review was to set out the current position of litigation funding and third-party litigation funding, and to consider access to justice, effectiveness and a host of regulatory options. Specifically, the review considered whether the current arrangements for third-party funding deliver the effective access to justice that we all want to see. We are incredibly grateful for the report.

We are now taking the time, as I said, to consider the report and its recommendations very carefully. I am sure that hon. Members here today will appreciate that it is essential to take this detailed and considered approach to what is a technical area but one that is fundamental to the human aspects of access to justice. We must ensure that the right balance is struck to ensure fair and effective access to justice, while enabling economic growth, which is, as so many others have said, the primary mission of this Government. We are aware that many are eagerly awaiting the Government’s response, and I look forward to announcing our way forward in due course. The stakes are high: access to justice, consumer protection and economic growth. We have to get this right.

I will say one more thing in response to the question asked by the right hon. Member for Skipton and Ripon on retrospectivity. I think it is highly unlikely, given the general rule-of-law principle against retrospectivity, that we would look to have that, but as I said, we must get this right; we have to get the balance right. We want an improved regime that works for the funders and for their clients and consumers.

Question put and agreed to.