Month: April 2025

Litigators, funders and policy groups are submitting responses to the Civil Justice Council (CJC) review of third party funding, the most significant review of the UK’s funding regime for many years. In this article, Hausfeld commercial disputes co-heads Ned Beale and Lucy Pert discuss why the UK’s wider economy needs funding now, more than ever

This January, Chancellor Rachel Reeves vowed to go ‘further and faster’ to boost the UK economy, stating that economic growth is the government’s number one mission.

And there is no better place for the government to incubate growth than in the legal sector. According to TheCityUK, in 2023 the sector contributed £37bn to the UK economy, equivalent to 1.6% of real gross value added, and posted a trade surplus of £7.6bn.

That £7.6bn is the result of centuries of history over which English common law has been established as one of the world’s most widely utilised legal systems, as well as the professionalism of British judges and arbitrators, and the entrepreneurship of British lawyers and firms promoting their services internationally. This success also reflects law and financial services going hand-in-hand as the UK continues to be the world’s largest financial services net exporter, with a trade surplus of £78.9bn in 2023.

These two jewels in the UK’s economic crown come together in the form of third party funding. This is funding for litigation and arbitration by investors. It enables impecunious claimants to pursue even against the largest defendants and gives well-resourced claimants flexibility to take litigation costs off balance sheet. UK third party funders’ assets under management are reported to have seen a ten-fold increase in their assets since 2012, amounting to £2.2bn in 2021. They are now likely significantly higher.

From shipping to insurance to flotations, the UK has a proud history of pioneering financial markets. The UK is rapidly emerging, alongside the US and Canada, as one of the leading global hubs for litigation funding. Every year sees UK funders expand their portfolios and teams, funding both UK and international actions. This is exactly the type of British financial and legal innovation that will grow our economy. It is entirely aligned with the Chancellor’s growth agenda.

We believe that the CJC review should be focusing on promoting the growth of third party funding, and building on the success the sector has already achieved. There is low-hanging fruit, including fixing problems the Supreme Court’s PACCAR judgment has caused and upgrading the Damages-based Agreements Regulations so they work in practice.

Beyond that, we think the CJC should tread lightly. In our experience, funders are typically more risk adverse than clients and only fund meritorious claims, where budgets are proportionate, against defendants who can pay. If the government can create an environment attractive to funders, more capital will grow the market and make funding less expensive.

That should not engender a US-style claims culture because of how funders themselves assess risk and the checks and balances that already exist in this jurisdiction such as the ability of defendants to strike out vexatious claims and costs shifting. Indeed, from a defendant side perspective, funding drives litigation efficiency and certainty. Funders typically want a streamlined procedure aimed to promote early settlement and judgment as soon as reasonably possible. Funders also require full after-the-event cover for the defendant’s costs. This advantages defendants who benefit from the costs and time saving of a faster process and having security that any adverse costs orders will be met.

There is also a wider benefit to UK society. We celebrate the British rule of law. However, that only has meaning if justice is accessible. Scandals like the Post Office and Interest Rate Hedging Product mis-selling demonstrate that without litigation funding individuals and SMEs will never get justice, let alone equality of arms. That is more important than ever in the age of big tech oligopoly. Funders facilitate group and collective claims that offer claimants cost and risk-free representation that would otherwise be impossible.

Already impacted by Brexit, the UK legal sector must maintain its position at the forefront of international disputes. Competition from other jurisdictions is increasing, whether the Netherlands’ collective regime, jurisdictions with less expensive legal systems, or the Dubai International Financial Centre, Singapore International Arbitration Centre and other commercial courts and arbitration hubs internationally. Growth should not come at the expensive of access to justice – happily, third party funding promotes both.

Ned Beale and Lucy Pert are co-heads of commercial disputes at Hausfeld.