The world of third party funding is undergoing a sea of change and reform, marked most significantly by the UK Supreme Court decision in PACCAR and its proposed reversal by the government. In the past year, the Civil Justice Council (CJC) issued recommendations for the regulation of third-party litigation funding, and the Chartered Institute of Arbitrators (CIArb) launched the Guideline on Third-Party Funding for alternative dispute resolution practitioners. These were preceded by the publication of the Principles Governing the Third Party Funding of Litigation by the European Law Institute in 2024.

To discuss, explore and debate the changes in the sector, the London Shipping Law Centre hosted an event on ‘Third Party Funding in International Commercial Arbitration and Litigation’ at the IDRC on Tuesday, 27 January 2026. Stewarts and 36 Stone sponsored the event.

The panel was chaired by Professor Rachael Mulheron KC (Hon) FBA, Professor of Tort Law and Civil Justice at the School of Law, Queen Mary University of London, who is a leading authority on litigation funding.

The panellists were:

• Moeiz Farhan, a barrister at 36 Stone, who gave an overview of the history of funding, ranging from the days of the doctrine of champerty and maintenance to the more recent PACCAR decision.
• Dr Hasan Tahsin Azizagaoglu, Portfolio Manager at Bench Walk Advisors, who provided practical input on how a decision to fund is made.
• Julian Chamberlayne, Risk and Funding Partner at Stewarts, who covered a range of issues including the duty of disclosure of funding agreements, the role played by funders in the conduct of proceedings, funders’ exposures to adverse cost orders and the scope for recoverability of funding costs.

Key takeaways:

• The prohibition on third party funding due to the doctrines of champerty and maintenance has largely faded into the mists of time. Lawmakers, judges and arbitrators have increasingly recognised the role of professional litigation funding, both in ensuring access to justice and as a reasonable choice for corporates who choose to litigate off balance sheet.
• At present, litigation funders in the UK are self-regulated. The UK and the EU have both considered a shift to “light-touch” regulation, with the EU shelving the idea for now.
• The CJC’s proposals for litigation funding regulations will contain many ‘devils-in-the-detail’ that warrant a further consultation to avoid the problems that have troubled the Damages-Based Agreements Regulations. That, coupled with the pressures of finding parliamentary time, may well mean such regulations are some years off.
• Funders approach cases differently from most lawyers. When assessing whether to fund a case, funders are driven first by the economic value of the case and the claim amount (direct loss) and second by issues of enforcement and recoverability, including the potential duration to achieve a return on their investment. Only if both are satisfied do they delve into the merits of the case.
• A fourth factor for funders is the credentials of the legal team, with a preference for an excellent legal team running a good case over an average legal team running an excellent case.
• Likewise, lawyers acting for parties seeking funding need to carefully consider whether they or someone else will comprehensively advise their client on funder selection and negotiate the terms of what are bound to be complex funding agreements with significant cost implications.
• There has been relatively limited reported use of third party funding in maritime disputes, but it could be an option for higher-value disputes, and there is increasing interest in seeking funding to monetise judgments or assign actions to funders.
• There are some differences in the treatment of third party funding in arbitration as distinct from court proceedings in England (excluding class actions from this discussion).
  • There is a duty in many arbitral tribunals to disclose the existence and identity of a funder, whereas in English litigation, there is no general duty to disclose. It was observed that while there is no equivalent general obligation to provide disclosure of insurance, including by protection and indemnity (P&I) clubs and freight demurrage and defence (FDD) clubs, there is no objectively compelling policy reason why disclosure of funding ought to be treated any differently than insurance.
  • Courts have indicated a willingness to make adverse costs orders beyond the extent of the funding provided (the “Arkin cap”), notably where there is excessive control by the funder. In contrast, funders are not generally exposed to adverse costs orders in arbitration as they are not parties to arbitration agreements.
  • There is scope for the recovery of third party funding costs in arbitration. That is distinct from litigation, where narrow cost definitions under the Civil Procedure Rules apply, restricting the recoverability of third party funding costs. The implementation of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPO) demonstrated a clear policy of prohibiting recovery of analogous additional cost liabilities in litigation.
• There are residual uncertainties relating to PACCAR, both in terms of when the government will pass corrective legislation and the applicability of the ruling to the funding of arbitration, notably if seated outside the UK.

You can find further information regarding our expertise, experience and team on our Litigation Costs and Funding page.

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