Checks and balances – funding agreements in the Competition Appeal Tribunal

Litigation funding has become a vital component of opt-out competition litigation in the UK Competition Appeal Tribunal (CAT). Since the Consumer Rights Act 2015 came into force, legal actions can be brought by a representative on behalf of a class of injured consumers or business. Most collective actions have in common that they rely on third-party litigation funding. When the opt-out collective action system was designed, the role of funding was underestimated and, crucially, left unregulated. While the lack of clear regulation has allowed experimentation and, thus, contributed to the more private actions in competition law, it has also led to unnecessary delays and costly legal battles to clarify the funding rules that apply in opt-out collective actions. This contribution identifies the gaps in the legislative framework and describes the solutions that have been developed so far. The chapter shows that a system design based on wide discretion of the Tribunal is workable, but it also lacks clarity. This uncertainty encourages challenges to funding agreements and requires drawn-out proceedings to clarify unclear rules and fill gaps. Those lessons are important in the context of designing an efficient regulatory framework for litigation funding in the UK and abroad.