UK Collective Actions: Stricter Certification and What It Means for Funders

Summary

The president of the Competition Appeal Tribunal (CAT) has signalled a more rigorous approach to scrutinising opt-out collective actions at the certification stage, with particular attention to whether the financial benefits of such claims flow to the claimant class or primarily to their lawyers and funders. Coming at a time when the UK Law Commission is consulting on expanding the scope of the opt-out regime, this development warrants careful consideration by all those with interests in the UK litigation funding market.

Background

The UK opt-out collective actions regime, which allows competition-based consumer claims to proceed on behalf of millions of individuals who have not actively chosen to participate, has operated since 2015. Under this model, claimants are automatically included unless they take steps to remove themselves.

The regime has attracted criticism from those who argue that it encourages a volume-driven claims culture more familiar to observers of the US litigation market, disproportionately benefiting those who finance and run the litigation rather than those on whose behalf it is brought.

Closer Examination at Certification

Mrs Justice Kelyn Bacon, who leads the CAT and sits as a High Court judge, used an address to the Bar Council in London last Friday to put the litigation funding and claimant legal community on notice. Speaking to an audience of lawyers, the Sunday Times reported, she indicated that the tribunal intends to look more carefully at opt-out claims before allowing them to proceed, acknowledging that this shift in approach would itself generate debate.

Her concern centres on whether proposed class actions genuinely serve the financial interests of the people they purport to represent, or whether they are structured in a way that prioritises returns to funders and solicitors over meaningful recovery for the class.

Evans v Barclays [2025] UKSC 48: Merits as a Certification Factor

 On 18 December 2025, the UK Supreme Court handed down a landmark ruling on the certification of opt-out collective proceedings in Evans v Barclays Bank Plc and others [2025] UKSC 48, arising from claims relating to alleged FX spot market manipulation.

Reversing the Court of Appeal, the Supreme Court confirmed that the merits of a claim are a relevant factor when deciding whether proceedings should be certified on an opt-in or opt-out basis. It adopted a sliding-scale approach: the weaker the claim, the less justification there is for opt-out certification.

Central to the Court's reasoning was the “leveraging effect” of opt-out proceedings, which can place defendants under disproportionate commercial pressure to settle even unmeritorious claims. The Court was clear that “access to justice” cuts both ways, defendants are equally entitled to it, and that opt-out is not a certification basis of last resort simply because opt-in is unattractive or difficult to fund.

For funders, the message is unambiguous: thorough merits assessment at the pre-investment stage is no longer merely good practice, it is a prerequisite for opt-out certification and, therefore, for the viability of the funding model itself.

PCR Suitability: A Distinct Ground for Certification Refusal

In a significant judgment for the development of the UK competition class actions regime, the CAT refused to certify a standalone opt-out competition class action against Apple and Amazon to proceed to trial, on the basis that the proposed class representative was not suitable to be authorised to represent the class of approximately 36 million claimants: Christine Reifa Class Representative Ltd v Apple Inc [2025] CAT 5.

This was the first time the CAT refused certification on the grounds that it was not just and reasonable for the proposed class representative (PCR) to act as a representative in the proceedings (the so-called “authorisation condition”). The certification hearing also featured the first-ever cross-examination of a PCR, with the proposed representative questioned in detail about her understanding of the funding arrangements and the potential conflicts of interest that could arise between the funder, the claimant law firm, and class members.

The CAT's judgment emphasised that the PCR “is not, and cannot be, merely a figurehead for a set of proceedings being conducted by their legal representatives.” The PCR must act as an independent advocate for the class and be capable of engaging robustly with advice received.

The CAT also criticised the use of broad confidentiality obligations in funding agreements that can only be waived at the unilateral discretion of the funder, considering it “crucial” in opt-out proceedings for sufficient information about funding arrangements to be made available to class members to enable each of them to make an informed decision about whether to opt out.

The Waterside Judgment: A Worked Example

Justice Bacon reportedly drew on a recent CAT decision to illustrate the concern. That proposed action in Waterside sought to represent tens of millions of consumers in a claim arising from alleged cartel conduct among salmon producers. When the tribunal assessed whether the claim should be certified, it found that the projected average recovery per household was below £20 and certification was refused.

In declining to allow the action to proceed, the tribunal noted the risk of a meaningful gap between what the class members themselves might ultimately receive and the financial rewards that would accrue to the lawyers and funders driving the litigation. This judgment acts as a practical illustration of the standard the CAT intends to apply more consistently going forward.

Implications for Litigation Funders

Justice Bacon was candid in her assessment of third-party litigation funding. She acknowledged its importance to the functioning of the collective actions regime, noting that without external finance many meritorious claims would simply not be viable. However, she was equally clear that the involvement of commercial funders introduces structural tensions, most notably the separation of financial risk from the interests of the claimant class, that the tribunal will continue to monitor actively.

Of particular significance for funders is the judge's reminder that the Court of Appeal has confirmed the CAT's broad power to reassess a funder's contractual entitlement to returns at any point during proceedings, up to and including the moment of judgment or settlement. This is not a theoretical power: funders should not assume that agreed return structures will be treated as settled once litigation is underway.

The Law Commission Consultation: An Expanding Market

Last month, the Law Commission launched a consultation examining whether the opt-out model should be extended beyond competition law to cover consumer claims more broadly. This would encompass areas such as financial mis-selling, product liability, and environmental harm, which are categories of claim that tend to involve relatively modest individual losses but considerable aggregate value.

The new project, which launched on 20 April 2026, will assess whether a broader consumer class actions regime is needed. The review encompasses: the benefits and risks of introducing a consumer class actions regime; whether an expanded regime should allow opt-in and opt-out claims; the practicalities of any new regime, including certification and management of proceedings; and key issues such as settlement, damages, costs, distribution of funds, and litigation funding.

The consultation runs until 30 October 2026, after which the Law Commission will formulate its views and proposals for reform. As the Law Commission's role is limited to making recommendations, any legislative reform would follow further consultation, government consideration, and the requisite implementation process.

A 2025 government review of the opt-out regime suggested the regime has evolved in “unexpected ways,” raising questions about whether it adequately protects consumers.

Consumer groups have been lobbying for the expansion of collective redress, particularly for low-value, high-volume harms such as data breaches, claiming that the lack of an opt-out regime beyond the competition sphere leaves consumers unprotected. However, concerns remain regarding distribution of damages, increased litigation risk, costs to business, and the potential for a US-style claims culture if the regime is expanded too far.

If the consultation leads to reform, the addressable market for litigation funders in England and Wales could expand significantly. However, the heightened certification scrutiny flagged by Justice Bacon will apply equally in any expanded regime, and funders should factor this into their assessment of potential opportunities.

Relevance for US-Based Clients

US-based funders active in, or evaluating, the UK market should note a key structural difference from the American class action environment. In US federal proceedings, judicial oversight of funder return arrangements is limited. In contrast, the CAT has now been confirmed, at Court of Appeal level, to hold a continuing discretion to revisit those arrangements at any stage. This is a meaningful distinction when modelling returns and structuring funding agreements for UK collective actions.

More broadly, the UK regime is at an inflection point: growing in scope and ambition, but under active judicial management. The message from the CAT's president is that growth will be permitted only where the interests of claimants remain genuinely central.

Key Takeaways for Funders

1. Additional scrutiny. The Supreme Court's decision on the practicability of opt-in proceedings opens up new considerations during the certification process. Claims covering classes which incorporate class members with low-value claims and class members with claims of significant value may now need to be cast as opt-out claims for smaller class members and opt-in claims for larger class members. Where large commercial operators stand to gain a leverage advantage from opt-out by bundling themselves with smaller claimants who may not claim their share, the Tribunal may properly refuse opt-out.
2. Certification will be harder to obtain and merits now count. The Supreme Court has confirmed that merits are a relevant factor in assessing whether a claim should be certified on an opt-out basis, assessed on a sliding scale — the lower the merits, the less justification for opt-out certification. The CAT will additionally apply searching scrutiny to whether proceedings genuinely serve the claimant class.
3. Funder returns can be revisited at any time. Court of Appeal authority confirms that agreed return structures are subject to ongoing judicial review. Contracts should be drafted and priced with this in mind.
4. The disconnect between class benefit and funder gain is a live risk. The Waterside refusal illustrates that claims perceived to benefit lawyers and funders more than claimants will not be certified.
5. The market is likely to grow. The Law Commission consultation may substantially widen the range of claims available for funding, which creates both opportunity and increased scrutiny.
6. Early and rigorous merits assessment is essential. Given the emphasis on certification-stage review, thorough case evaluation and thoughtful claim structuring at the outset will be critical to successful outcomes.
7. PCR selection is a substantive risk, not a formality. The PCR must act as an independent advocate for the class and be capable of engaging robustly with advice received; they cannot be merely a figurehead. Funders should also ensure that funding agreements do not contain broad confidentiality obligations that prevent class members from accessing sufficient information to make an informed decision about whether to opt out. Failure to address these issues at the outset creates a standalone ground for certification refusal.

This alert has been prepared for informational purposes only and does not constitute legal advice. If you would like to discuss any aspect of the matters raised, please contact RWeekes@crowell.com and NPhillips@crowell.com