Justice must work for victims not investors

Third-party litigation funding is increasingly looking less like justice in action and more like a volume-driven acquisition model, writes Oliver Ryan MP

Access to justice is a core part of the British legal system. When people are wronged by powerful institutions, they must have a realistic route to redress. That is why third-party litigation funding exists, and why it has a legitimate place in our legal system.

But access to justice only works if it delivers justice. And increasingly, the evidence suggests that parts of the litigation-funding market are drifting away from that principle and towards a model that prioritises financial return over fair outcomes.

The government’s recent announcement to protect litigation funding “and overturn Paccar” is well-intentioned. But policy must be grounded in how systems behave in reality, not how we hope they do.

The Post Office scandal remains one of the most shameful episodes in our legal history. Sub-postmasters were grievously wronged and deserved swift and full compensation. Yet when damages were finally paid, around 80 per cent, “some £46m”, went to funders and lawyers, not victims. That cannot be right. A system that delivers that outcome is not working as it should.

Nor is this a one-off. In my own constituency, families were left exposed when the law firm behind a cavity wall insulation claim “SSB” collapsed with debts exceeding £200m, with £128m owed to litigation funders. With no safety net in place, ordinary people were left with stalled claims, no protection and no clarity. The risks had been pushed downwards.

Even at the top of the market, the warning signs are there. In August, it was reported that Pogust Goodhead, the UK law firm behind a £36bn class action against BHP, abruptly dismissed its chief executive following tensions with its funder, Gramercy. When claims of that scale are destabilised by disputes between financial backers, as we also saw in the Merricks v Mastercard case, it raises serious questions about governance and control.

What is actually incentivising these claims?

Meanwhile, we are seeing a rise in speculative or marginal claims that arguably do little to advance real justice but create real economic drag. Marks & Spencer is currently facing a potential data breach claim driven by KP Law who are backed by a funder called Asertis, despite a lack of evidence that meaningful customer data “such as useable payment or card details, or any account passwords” was taken. The associated advertising campaign is being run by ‘Join the Claim’ who have previously been accused of misleading advertising. The regulator has stated that adverts organised by the firm on a separate case gave the impression that Join The Claim was litigating group action, rather than just passing on leads to KP Law, in breach of the code. This looks less like justice in action and more like a volume-driven acquisition model.

The common issue is incentives. Funders are rewarded for scale and settlement pressure. Law firms are encouraged to push the boundaries of merit. Claimants bear the risk when firms fail. And British businesses face growing legal exposure disconnected from actual harm.

None of this argues for shutting down litigation funding. Doing so would close the court’s doors to many people who genuinely need them. But protecting access to justice must also mean protecting balance, transparency and fairness.

That means capping excessive funder returns, enforcing capital adequacy so claimants are not left stranded, tightening oversight of how claims are marketed, and ensuring that victims – not investors – are the primary beneficiaries of success.

If Labour wants to be serious about justice and growth, it must recognise that an unbalanced litigation-funding market serves neither. Justice should not be a financial product. And access to justice should never come at the expense of public confidence in the system itself.

We can support victims and uphold fairness at the same time. But only if we are prepared to put clear limits on a system that, left unchecked, risks putting profits before people.

Oliver Ryan is the Labour MP for Burnley