A think tank has called for urgent regulation to improve transparency in the litigation funding market and identify the ultimate sources of money. The Civitas Institute argued that courts, claimants, and defendants currently do not know who actually owns or controls the capital behind funded claims.
Third-party litigation funding assets have grown from £198 million in 2011 to £2.2 billion by 2022, with projections exceeding £3.7 billion by 2028. Despite this growth, a “transparency blind spot” remains at the moment.
The Civil Justice Council (CJC) recommended “light-touch regulation” of litigation funding in its June 2025 report. The council said the ultimate source of funding should be disclosed but did not detail what this entails. Civitas argued that legislation must specify the tracing standard in terms equivalent to the beneficial ownership register standard. A general obligation to identify the “ultimate source of the funding” without that specification would be interpreted in the manner most convenient to the market and least demanding of disclosure.
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Civitas researcher Danna Brown, a former senior associate in the private funds group of Clifford Chance and then of US law firm Cleary Gottlieb Steen & Hamilton in London, authored the report. Seema Kennedy,
Three regulatory gaps
The report said it backed the “broad direction” of the CJC recommendations and more recent government changes to the collective action regime. However, it identified three gaps in the envisaged scheme. The first gap is the lack of a specified tracing standard.
The second gap involves the regulatory authority. The CJC decided against recommending Financial Conduct Authority (FCA) regulation at this stage. Civitas said this left the risk of funder insolvency during proceedings unaddressed. The FCA’s supervisory architecture covered investment management conduct, capital adequacy assessment, and conflict-of-interest management in markets of comparable complexity and scale. Civitas argued that it is the appropriate regulatory authority for the third-party litigation funding sector.
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The third gap is sanctions screening. Neither the CJC nor government has mentioned any mechanism for verifying that “no funder or beneficial owner of funder capital is a designated person under the UK sanctions regime” or was owned or controlled by a designated person. A check by the Office of Financial Sanctions Implementation, which administered the UK’s financial sanctions regime, should be a prerequisite to funded proceedings.
The absence of any verification mechanism in the current reform agenda leaves the most precisely documented structural risk in this report unaddressed.
While the government announced in December it would legislate to reverse the Supreme Court’s 2023 PACCAR ruling and in January confirmed it would introduce a new regulatory framework for litigation funding, nothing has happened since. The report noted that the reform process remains, at the time of writing, a statement of legislative intent. The accountability framework it will produce ca