Litigation funding is promoted as a route to justice. The planned closure of Litigation Capital Management (LCM) exposes the uncertainty behind that promise.

The Law Society Gazette reports that LCM has entered an orderly run-off after recording annual losses of approximately £87 million. Seven of its eight investments concluded during the year produced losses. The company, which finances individual cases and class actions, will stop making new investments while managing its existing portfolio to completion.

The lesson here is clear – commercial backing is no guarantee of a successful claim.

Investment is not validation

A funder assesses litigation as a potential source of returns. Its decision to invest does not establish liability or assure compensation.

LCM attributed part of its deteriorating performance to substantial capital concentrated in a small number of unsuccessful cases. That does not prove those claims were meritless, but it shows that professional investors can seriously misjudge litigation risk.

People considering a class action should therefore look beyond impressive budgets and headline claim values. What matters is the evidence, the likely duration and what they might actually receive after deductions.

Who funds the case to the finish?

LCM’s announcement does not mean its existing proceedings have been abandoned. Its intention is to manage them to completion.

Nevertheless, the decision raises questions relevant to any funded claim – are financial commitments secure, what happens if costs exceed expectations, and what protection exists if the funder encounters difficulties?

Claimants deserve those answers before proceedings begin.

Moreover, policymakers should challenge the assumption that more litigation finance necessarily benefits consumers. Funding arrangements should face rigorous scrutiny, alongside consideration of quicker and less expensive routes to redress.

The measure of success should be compensation delivered to claimants—not capital committed to lawsuits.