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Key Takeaways from LFJ’s Town Hall on How Litigation Funders Should Respond to the UK Supreme Court Ruling

August 11, 2023

Key Takeaways from LFJ’s Town Hall on How Litigation Funders Should Respond to the UK Supreme Court Ruling

Wednesday, August 9th, LFJ hosted a panel of UK-based litigation funding experts who discussed the recent UK Supreme Court decision, and the potential impacts on the funding industry. The expert panel included: Nick Rowles-Davies (NRD), Founder of Lexolent, Neil Johnstone (NJ), Barrister at King’s Bench Chambers, and Tets Ishikawa (TI), Managing Director at LionFish. The panel was moderated by Peter Petyt (PP), Founder and CEO of 4 Rivers Services. PP: How does this ruling impact the enforceability of LFAs in current, ongoing cases?  And what about LFAs from previously funded and concluded cases?   NRD:  It has a pretty big impact.  First of all, the existing arrangements between clients and litigation funders are going to come under scrutiny, because the lawyers acting for clients are going to have to review their positions. This is not a decision which is making new law, this is a statement of existing law as it has always been, so that review will have to be dealt in the light of the decision. The bigger impact is going to be on concluded cases. That may cause some difficulties. I’m already hearing that there are ongoing discussions on matters that have already concluded, where an agreement that provided for a percentage to be paid to the funder is now being discussed as to whether it should have been paid. That is going to be a distraction, it is going to be an ongoing issue, and I suspect that there will be opportunistic attempts on the part of defendants, in terms of challenging existing litigation funding agreements. So how that concludes, one can only guess, but the reality is, it’s a distraction and disruption, and will be an ongoing issue. PP: Tets, you’re running a fund. You’ve concluded agreements, you’ve got ongoing agreements. How are you proposing to deal with all of this?  TI: Ultimately we are in the business of funding litigation cases, so the world goes on. We can’t stop doing it just on the basis of what may be a speculative risk. What we’re trying to understand here, is the key risks we have. In terms of our book, we don’t have any percentage share of the awards, in relation to proceedings in the CAT. So we’re safe in that regard. But in terms of enforceability, there are some agreements that we’ve had to refute. But obviously, that’s a commercial conversation, and the reality is, people are generally appreciative that they’ve got funding, not ungrateful, so there’s a lot of cooperation. I agree with Nick that generally speaking, the ongoing cases and cases going forward are more manageable. The big distraction will be the concluded cases. My position is slightly more nuanced than Nick’s, in that I think it is a distraction, but I think it’s going to be far less of a risk, partly because the reality is that a lot of funding agreements are entered into in the first place with the purpose of helping claimants that are impecunious. If the claimants have got damages out of it, they are certainly very grateful. Granted, there are some who may not have gotten as much as they wanted because of funding arrangements. But there is the fact that they’ve gone through a very long litigation process. If it was all about money, then some might very well pursue that course of action. But the reality is, most will think twice about going after a funder, and if they do, the chances are that they’ll probably need funding anyway. So if they have to go back to funders, only funders with no interest or claims or willingness to back the industry in the UK would fund those claims. So I think it’s more of a distraction than a real risk. PP: Do you see any consolidation or direct impacts on the consolidation piece, from this judgement?  NJ: I suspect there will be anyway. This comes at a time that is difficult for all funders given the larger macro-environment. This comes at unfortunate timing. However, the hardest knives are forged in the hottest fires. I do think you will see not just consolidation within the industry, but funders looking at where they can best add value, such as portfolio funding or other strategies, so they have a proper niche within the market. Overall, it’s not terminal for the industry by any stretch. It is a bump in the road that is inherent in any growing industry. But I do think that regulatory clarity would help the industry a lot. There is a lot of useful ammunition for ILFA in Lady Rose’s dissenting judgement and in previous judicial comments making well-worded judicial criticism of the legislative patchwork we have in the UK. And I think there could be a very good argument to put forth to a government that I hope could be sympathetic to wishing this industry continues. London is a legal and financial capital of the world, and this industry sits at that nexus. So long term, there is nothing to particularly worry about. To listen to the full panel discussion, please click here.

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Commercial Regulatory Issues

Congress Debates Litigation Funding Bill

By John Freund |

Republican lawmakers have renewed their push to rein in third-party litigation funding, with a House Judiciary Committee debate highlighting how politically charged the issue has become.

An article in The Daily Signal reports that members of the House Judiciary Committee clashed this week over legislation that would require disclosure of third-party litigation funding arrangements in federal courts. Supporters of the bill framed it as a transparency measure aimed at exposing the financial interests behind major lawsuits, while opponents warned that the proposal risks limiting access to justice and unfairly targeting a growing segment of the legal finance market.

During the committee debate, Republican lawmakers argued that outside investors are increasingly influencing litigation in ways that can distort outcomes and inflate settlement values. Several speakers characterized litigation funders as profit-driven actors operating in the shadows, asserting that judges and defendants deserve to know who stands to benefit financially from a case. Proponents also linked litigation funding to broader concerns about rising legal costs and what they describe as abusive litigation practices.

Democratic members pushed back, questioning whether the bill was designed to solve an actual problem or simply to deter plaintiffs from bringing legitimate claims. Critics of the proposal argued that disclosure requirements could chill funding for complex and expensive cases, particularly those involving individual plaintiffs or smaller businesses facing well-capitalized defendants. They also raised concerns about confidentiality and whether revealing funding arrangements could give defendants a tactical advantage.

The debate reflects a broader national conversation about the role of litigation finance in the civil justice system. While disclosure requirements have already been adopted in certain courts and jurisdictions, the proposed legislation would impose a uniform federal standard. Supporters say this consistency is overdue, while opponents argue it could undermine carefully negotiated funding structures that allow cases to proceed at all.

Commercial

APCIA Supports Federal Litigation Funding Disclosure Bill

By John Freund |

The insurance industry has intensified its campaign for greater scrutiny of third-party litigation funding, with one of its most influential trade groups backing new federal legislation aimed squarely at disclosure.

An article in Insurance Journal reports that the American Property Casualty Insurance Association has thrown its support behind a proposed federal bill that would require parties in civil litigation to disclose the existence of litigation funding agreements. The legislation, which is currently being considered by the House Judiciary Committee, would mandate that courts be informed when a third party has a financial stake in the outcome of a lawsuit. Proponents argue that this information is essential for judges to understand who stands behind a claim and whether outside financial interests may be influencing litigation strategy.

APCIA framed its endorsement around long-standing concerns about rising litigation costs and what insurers describe as “social inflation.” According to the group, undisclosed litigation funding arrangements can drive up claim severity, prolong disputes, and ultimately increase costs for insurers and policyholders alike. By requiring transparency, APCIA believes courts would be better positioned to manage conflicts of interest, assess discovery disputes, and evaluate settlement dynamics.

The association has been an active voice in the national debate over litigation finance for several years, often aligning with other insurance and business groups calling for disclosure regimes at both the state and federal level. APCIA leadership emphasized that the proposed legislation is not intended to ban or restrict litigation funding outright, but rather to ensure that judges and opposing parties have visibility into financial relationships that could bear on a case.

The bill would apply broadly in federal courts and could have significant implications for how funded cases are litigated, particularly in complex commercial disputes and class actions where third-party capital is more common. Insurers view federal action as a way to establish consistency across jurisdictions, rather than relying on a patchwork of state rules and local practices.

Commercial Regulatory Issues

Why Big Law Is Walking Away From Suits Against Governments

Elite global law firms are increasingly declining to pursue massive claims against sovereign states, even when potential recoveries run into the billions. The trend reflects a reassessment inside Big Law of the risk, cost, and strategic value of investor state and public law disputes that can take years to resolve and often carry significant political and reputational complications.

An article in Law.com International reports that top-tier firms which once dominated investor state arbitration and other government facing disputes are now far more selective about taking on such matters. Lawyers interviewed for the piece point to a combination of commercial pressure, client demands, and internal firm dynamics that make these cases less attractive than they once were. Although headline damages can be enormous, the cases typically require years of work, large multidisciplinary teams, and significant upfront investment with no guarantee of recovery.

Another key factor is reputational risk. Firms are increasingly cautious about being seen as adversaries of governments, particularly in sensitive jurisdictions or disputes involving public policy, natural resources, or infrastructure. Partners noted that political backlash, enforcement uncertainty, and the potential impact on other client relationships all weigh heavily when firms decide whether to proceed.

The article also highlights that many corporate clients are less willing to bankroll these disputes directly. Budget scrutiny has intensified, and companies facing disputes with states are often reluctant to commit tens of millions in legal fees over a long time horizon. This dynamic has contributed to a rise in alternative fee arrangements and third party litigation funding, though even those tools do not fully offset the burden for law firms carrying significant work in progress.

As a result, specialist boutiques and arbitration focused firms are increasingly stepping into the space once dominated by global giants. These smaller players often have lower overhead, deeper niche expertise, and a greater tolerance for the long timelines associated with sovereign disputes.