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The UK Ministry of Justice has announced an intention to remove English third-party litigation funding from the current requirements of the Damages-Based Agreements Regulations 2013 ("DBA Regulations") and provide for a different regulatory framework. As we have discussed previously here and here, various forms of uncertainty remain for third parties who wish to fund UK litigation or arbitration while taking a cut of damages awarded, although funders' return based on multiples of funding has been approved.
The present regime of the DBA Regulations restricts the amount of damages a third party funder may share in, as well as providing certain requirements for how the agreement may be formed.The previous Government set out a basic bill to simply remove third-party litigation funding from the DBA Regulations, but the bill fell after the last election. The Civil Justice Council ("CJC") subsequently issued a wide-ranging report recommending that removal, and light touch regulation of the industry (largely regarding consumer claim funding and a statutory requirement for independent legal advice to the funded party).It is understood from the Government's announcement that reform will include at least some of the CJC's recommendations and therefore a quick revival of a basic exclusionary bill is not expected.Instead, broader legislation to lightly reform regulation of the industry can be expected in the latter half of 2026 at the earliest.
A broad discussion of and comparison between U.S. and UK litigation funding markets can be found here.
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