The UK Supreme Court, whose landmark 2023 PACCAR ruling redefined litigation funding agreements as damages-based contracts, casting uncertainty over the enforceability of thousands of funding deals and challenging the future viability of the industry. Image Source: Gettyimages

Therium, once a rising star in the litigation funding industry, was the key backer of the controversial arbitration brought by eight Filipino claimants asserting descent from the defunct Sultanate of Sulu in a $15 billion case against Malaysia.

The firm has recently scaled back operations and transferred much of its portfolio to Fortress Investment Group, a New York-based asset manager known for fiscal restraint. Industry observers point to the handover of Therium’s previously aggressive investment model to Fortress as a symptom of a deeper issue within the litigation funding model.

Industry observers point to the handover of Therium’s previously aggressive investment portfolio to Fortress as a symptom of a deeper issue within the litigation funding model.

How Does It All Work?

At its core, litigation finance involves third-party investors funding legal claims in exchange for a share of any eventual settlement or judgment. While the exact share funders receive varies and isn’t publicly disclosed, agreements often include multiples of funded costs plus a percentage of recoveries above a threshold—such as Therium’s agreement with ECU in the HSBC case, seeking three times its investment plus 20% of recoveries over £100 million.

Therium’s agreement with ECU in the HSBC case sought three times its investment plus 20% of recoveries over £100 million.

If the case is lost, funders like Therium not only forfeit their investment but may also be responsible for legal costs incurred before their formal involvement. As seen in the HSBC case, courts have ruled that because funders often have the greatest financial stake and potential gain in litigation, they can be held liable for reasonable pre-funding expenses.

But what about the huge piles of cash?

Funds raised by litigation funders—with Therium’s raised funds often touted as exceeding a billion pounds—are typically committed capital from institutional investors, drawn incrementally and locked into long-running cases.

Therefore, these are not cash piles sitting idle; rather, they are promises of capital, deployed selectively and often tied up for years.

While the potential rewards can be substantial, they are highly concentrated in a small number of cases, therefore putting tens of millions at risk in single cases. The Sabah arbitration, for example, has already run for more than half a decade and used upwards of $20 million from Therium.

The Post Office Case: Where even a Victory is a Loss

While the activities of litigation funders are infamously opaque, Therium’s previous involvement in the Post Office Horizon litigation can offer some insight into the limited financial upside that can follow even a landmark legal victory.

The case—brought in 2017 by over 550 sub-postmasters who were wrongly accused of fraud due to failures in the Horizon IT system—was ultimately settled for around £58 million.

But by the time lawyer fees, the reimbursement of litigation funders, and other obligations were paid, only about £12 million remained for the claimants—or about £20,000.

Therium, which had reportedly invested around £24 million in the case, recovered approximately the same amount—barely breaking even despite receiving the lion’s share of a settlement intended as justice for their clients.

Therium, which had reportedly invested around £24 million in the case, recovered approximately the same amount—barely breaking even.

Despite the profound moral and social value of the case, the structure of most funding agreements—where funders are paid first, but only to the extent recoveries allow—meant that neither investors nor claimants came away with much.

For Therium, the Post Office result may well have reinforced a broader tension in the business model: that socially significant, legally complex cases rarely generate the types of returns needed to satisfy institutional backers—after all, litigation funders are businesses not social enterprises.

While speculative, this financial pressure may have made high-risk, high-reward international arbitration like the Sabah dispute more appealing compared to Therium’s original focus on commercial disputes.

The PACCAR Fallout and Complications with Getting Paid Whatsoever

Further complicating matters for funders is the legal shockwave triggered by the UK Supreme Court’s 2023 decision in PACCAR v Road Haulage Association. In that case, the Court ruled that many litigation funding agreements—specifically those where funders earn a share of the damages awarded—actually fall under the legal category of damages-based agreements (DBAs).

This was a major shift: for years, funders had believed that their contracts weren’t DBAs at all.

Why does that matter? Because DBAs come with strict rules. They must follow detailed regulations, including limits on how much can be taken from a client’s damages (usually no more than 50% in stark contrast to the returns sought by Therium’s industry), and they can only be used by lawyers or certain regulated claims companies.

By comparison, litigation funders are largely unregulated, and their contracts weren’t designed to meet these rules. As a result, the Court found that many funding agreements were simply unenforceable.

The UK Supreme Court found that many funding agreements were simply unenforceable.

To adapt, funders quickly started rewriting their contracts. Instead of taking a percentage of the damages, they began tying their returns to a multiple of the amount they invested (for example, two or three times their funding). But even this workaround has hit legal turbulence.

In Therium v Bugsby Property, the funder tried to enforce one of these newer agreements. Bugsby pushed back, arguing that even a small clause promising 5% of the damages made the whole agreement invalid.

The court didn’t settle the question but did allow Therium to freeze Bugsby’s assets while the issue plays out in arbitration. That case is now a test of whether funders can “cut out” the problematic parts of old contracts and still get paid, and a sign of further turbulence for the fundamental business model of litigation funders.

Future Troubles and a Business in Retreat

While litigation funders at their best can play a crucial role in widening access to justice—particularly in group actions and complex commercial disputes—their business model is now under unprecedented pressure that perhaps exposes some fundamental contradictions between justice for clients and their own profits.

The combination of concentrated risk, slow returns, regulatory headwinds, and reputational exposure from failed and controversial cases appears to have chipped away at investor confidence, with litigation funding insiders reporting on Therium’s struggles to raise further capital and a diminished goal of simply servicing their current cases until they can be closed—a process it has also outsourced to Fortress.

Litigation funding insiders report on Therium’s struggles to raise further capital and a diminished goal of simply servicing their current cases.

With courts in Spain annulling the award and the Paris Court of Appeal expected to reject enforcement following a hearing this summer, the Sabah case may now serve as a cautionary tale: a massive, high-risk legal gamble—driven by a funder under pressure and chasing a payout far beyond typical legal returns—could ultimately force a strategic retreat regardless of earlier successes in fundraising.

REFERENCES

Bates Wells. (2023, August). The future of litigation funding post-PACCAR. https://bateswells.co.uk/

Financial Times. (2024, March). Therium’s returns from Post Office case fell far short of investment. https://www.ft.com/

Kain Knight. (2024, February). Post-PACCAR UK litigation funding landscape. https://kain-knight.co.uk/

Osborne Clarke. (2023, July). UK Supreme Court deems litigation funding agreements unenforceable. https://www.osborneclarke.com/

Therium. (n.d.). Investing in Therium. Retrieved July 17, 2025, from https://www.therium.com/

VRITimes. (2025, May). Therium’s retreat: Inside Fortress's takeover of the legal portfolio. https://www.vritimes.com/

KnowSulu. (2024). The Therium controversy: The high-stakes risks behind the Sulu arbitration fallout. https://knowsulu.ph/

Travers Smith LLP. (2022). ECU v HSBC: Costs and funder liability. https://www.traverssmith.com/