The UK’s litigation funding landscape faces significant challenges as recent court decisions and government inaction create uncertainty for investors, according to industry leaders.
Appeal Court Decision Heightens Tension
In a development that has intensified concerns, the Court of Appeal recently removed a ‘stay’ on several Competition Appeal Tribunal cases, bringing the ‘multiple approach’ funding model under scrutiny. This widely-used model – where funders calculate returns based on multiples of invested capital rather than percentages of damages – now awaits judicial review.
Cases involving major corporations including Apple, Sony, and Mastercard will proceed after the court cited government inaction as the reason for lifting the stay.
PACCAR Ruling and Its Aftermath
The current situation stems from last year’s Supreme Court judgment in the PACCAR case, which involved allegations against European truck manufacturers for competition law violations. That ruling determined that funding arrangements based on percentage-of-damages were unenforceable, sending shockwaves through the industry.
Government Response Under Scrutiny
Industry frustration centers on the Labour government’s decision to postpone the Litigation Funding Bill pending a review that may extend into summer. This delay has drawn criticism from funders who see it as creating unnecessary uncertainty.
“This has become a moment of reckoning,” one funder told City AM, arguing that government indecision is “helping defendants try to lock the door on access to justice” for claimants like the subpostmasters.
Capital Flight Concerns
The situation raises concerns about London’s standing as a global legal hub. Another industry source warned that investment is being redirected elsewhere: “The UK has a world-leading legal sector, but it’s making it incredibly challenging for us to back new cases in the market right now.”
This sentiment echoes comments from Burford Capital CEO Chris Bogart, who confirmed in December that his London-listed firm was reducing its involvement in UK dispute resolution due to the prevailing uncertainties, questioning London’s future “as a destination of choice for legal issues.”
As the industry awaits clearer direction from both the courts and government, the competitive position of the UK’s legal services sector hangs in the balance.