Nearly three decades ago, the Labour government led by Tony Blair withdrew legal aid from most civil litigation cases, setting the stage for the development of conditional fee agreements, commonly known as "no win, no fee" arrangements. Under this system, claimants were not required to pay their lawyers upfront; instead, legal fees would only be recovered if the case was successful. This shift aimed to maintain access to justice by transferring the financial risk of litigation to defendants and their insurers.

Initially, claimants could protect themselves from adverse costs orders through after-the-event (ATE) insurance. Although this form of insurance remains available, recent legislative changes have generally prevented claimants from recovering ATE premiums from defendants, reducing the effectiveness of conditional fee agreements as a funding tool.

In high-profile cases, such as the Post Office Horizon scandal involving sub-postmasters accused of fraud, third-party litigation funding has played a critical role in enabling claimants to pursue complex litigation. However, a 2021 Supreme Court judgment in the case of Paccar introduced restrictions on the ability to recover certain litigation funding costs. The government has subsequently announced plans to introduce legislation, expected in the forthcoming King’s Speech, aimed at reversing the effects of this ruling.

Litigation funding serves not only to facilitate claimants’ access to legal advice and representation but also provides protection against potential adverse cost risks. This is particularly relevant in the context of opt-out collective proceedings, where a large group of claimants are deemed included in the litigation unless they explicitly choose to opt out. While such regimes are attractive to litigation funders, they have raised concerns among businesses, prompting a government-led consultation on their potential impact.

Critics argue that collective actions under the opt-out model could deter investment and economic growth. However, some legal experts contend that a robust competition enforcement regime, underpinned by effective sanctions and remedies, actually promotes innovation and growth. Moreover, collective proceedings typically arise from regulatory findings of anti-competitive conduct, underscoring their role in maintaining fair market conditions.

There is ongoing debate about whether the opt-out collective action framework should be extended beyond competition law to encompass other areas such as environmental and product liability claims. The Law Commission is expected to explore these proposals later this year.

Senior members of the judiciary have recently highlighted that advances in artificial intelligence are likely to lead to a sharp increase in civil litigation. Ensuring that collective redress mechanisms function efficiently and fairly will become increasingly important to secure broad access to justice for claimants while safeguarding defendants’ interests.

Stephen Hockman KC, a former chair of the Bar Council of England and Wales and the Society of Labour Lawyers, has been a key commentator on these developments.