A group claim is usually paid for by someone who is not a party to it. That single fact sits behind third-party litigation funding, and for anyone named in a class action or representative proceeding, it shapes what happens to the money if the case recovers.
Most group members never sign the funding agreement. The lawyers running the case arrange the capital, the funder prices the risk, and the proceedings move forward. Knowing how that arrangement works-what it pays for, what it can deduct, and how a court treats it at the end-turns a settlement notice from a document you skim into one you can actually read.
The detail below leans on the Australian and English frameworks, where collective funding is most established, with short comparisons to the United States. Rules vary by jurisdiction and by case, so treat this as a map rather than a substitute for the documents in your own matter.
Who actually pays to bring a group claim
Collective litigation is expensive before it is rewarding. Legal fees, expert evidence, court and tribunal fees, notification and translation costs, claims administration, and, in some forums, security for costs all fall due long before any recovery arrives.
A litigation funder supplies capital to meet those costs. It is typically a specialist finance company with no other stake in the dispute. In return, it takes an agreed return if the claim produces a recovery and, under a standard non-recourse structure, receives nothing if it does not.
Two features distinguish this from a loan. The funder’s repayment depends on the outcome rather than a fixed schedule, and the group member usually has no direct contract with the funder. The applicant’s lawyers negotiate the agreement, and the group is affected by its terms in practice.
What “non-recourse” means for the people in the group
Non-recourse funding is designed so that the financial risk sits with the investor rather than the claimants. If the claim is dismissed or a settlement collapses, the funder generally absorbs the capital it spent, and group members generally owe it nothing under the funding arrangement.
That protection has boundaries. “Generally” is carrying weight, because the answer depends on the funding terms, the forum, and any order the court makes. In Australia and England, an unsuccessful case can expose a party to an adverse costs order, and the rules on who bears costs, and whether a funder must provide security, differ between courts and proceedings. Many funding agreements include an indemnity for the representative applicant against adverse costs, and after-the-event insurance is often used in England for the same purpose. In the United States, the general rule that each side pays its own fees reduces, though does not remove, that exposure.
Where the capital comes from and how it is released
Funders rarely transfer a lump sum. Capital is normally released against a budget and tied to milestones-certification or a collective proceedings order, the close of discovery, the exchange of expert reports, mediation, trial. The money is usually restricted to litigation costs and tracked through a controlled account, which keeps a clear record of what was spent and when.
That structure matters for a practical reason: funding can stop. Many agreements allow the funder to end its commitment on notice if the case deteriorates, and costs already committed up to that point still have to be met. A claim that looked fully financed at the outset may not stay that way.
What happens to a settlement before it reaches you
A group settlement is not simply divided and paid out. It has to be approved by the court or tribunal, which examines whether the terms are fair and reasonable for the group as a whole. Group members receive notice of the proposed settlement before a public approval hearing, and the court can hear objections.
Once a settlement or judgment is approved, the money is distributed according to a plan. A funding agreement typically sets out a priority order: legal costs and disbursements are met, the funder recovers the capital it deployed and its agreed return, and the remainder is distributed to group members. Where a common fund order applies, the funder’s commission is deducted from the recoveries of the whole class, including people who never signed a funding agreement of their own.
Courts do not treat those priorities as automatic. In England and Wales, the Competition Appeal Tribunal has broad discretion over how a collective settlement is split between the class and a funder. In the Mastercard interchange fee proceedings, the tribunal approved a £200 million settlement and directed that half be ring-fenced for class members, with the funder reimbursed for its expenditure plus an uplift of 50 per cent of that expenditure-an approach the High Court upheld on judicial review in 2026. In Australia, the High Court confirmed in 2025 that the Federal Court can make a common fund order at the point of settlement or judgment, allowing a funder’s commission to be deducted across the class, while indicating that an equivalent percentage order for solicitors is not available outside Victoria’s group costs order regime.
Distribution models also involve trade-offs that are genuinely arguable. A plan that caps each claimant’s payment at a modest fixed sum may encourage more people to register and spread the recovery widely; a plan that pays strictly in proportion to documented loss may favour the largest claimants. Neither is automatically fairer, and the choice is usually explained in the settlement notice.
What you are generally entitled to be told
Transparency rules differ sharply by jurisdiction, which is why two people in similar cases can know very different amounts about who is funding the claim.
In Australia, the Federal Court’s Class Actions Practice Note is comparatively explicit. It requires the applicant’s lawyers to notify group members of any applicable litigation funding charges and legal costs, to disclose the funding agreement to the court before the first case management hearing, and to alert group members to the existence and consequences of funding arrangements in the opt-out notice. Where a settlement involves deductions for legal costs or funding charges, the court generally expects the supporting material to show that group members were told about those deductions as soon as practicable.
In England and Wales, there is no automatic general requirement to disclose a funding agreement in High Court or Competition Appeal Tribunal proceedings, though disclosure often arises at certification in the tribunal and where a defendant seeks information to support a security for costs application. In the United States, there is no uniform federal rule either; disclosure depends on district-level standing orders and a growing patchwork of state statutes. For a group member, the practical lesson is to look for the funding disclosure specifically, rather than assuming it appears in the headline materials about the case.
Opting out, registering, and what you actually keep
How you participate depends on the regime. Australian representative proceedings and US damages class actions are generally opt-out: you are included unless you take the stated step to leave. Group litigation orders in England are typically opt-in, and the Competition Appeal Tribunal runs an opt-out model for collective proceedings. Missing an opt-out or registration deadline can end your involvement in the claim.
The number that matters most is your net recovery. A gross settlement figure can be reduced by legal costs, the funder’s return, administration costs, and amounts set aside before distribution. Questions worth putting to the lawyers handling the case include whether the funder’s share is calculated on the gross or net recovery, whether it is capped, and how unclaimed money is handled-some plans top up participating claimants, while others direct residuals to a charity or access-to-justice fund.
The rules are still being written
Funding regulation is moving in several directions at once.
Australia has cycled through substantial change. Funding schemes were brought within financial services regulation in 2020, then largely exempted again by the 2022 funding regulations following a Federal Court decision on the scope of the regime, with ASIC extending related relief into 2029. The Australian Law Reform Commission’s 2018 report on class actions and litigation funders recommended stronger court oversight of funding agreements, and several aspects of that debate remain live.
In the United Kingdom, a Civil Justice Council review has examined regulation of funding in consumer and group claims, including disclosure of funding terms and the information given to class members, while a 2023 Supreme Court ruling on damages-based agreements reshaped how some funder returns may be structured. In the United States, states have moved faster than Congress: New York enacted consumer litigation funding legislation in late 2025 with an effective date in 2026, and federal disclosure proposals for class actions and mass torts have been introduced. A current overview of these frameworks is maintained in the UK chapter of Lexology’s In-Depth guide to third-party litigation funding.
Because funding couples litigation with capital markets, the financial position of the firms and funders involved is reported on in its own right. For readers who follow that commercial dimension, ongoing coverage of litigation and law firm finances can sit alongside the court documents and settlement notices as background on how the sector is developing.
Comparing the three main frameworks
The table below sets out how group members typically experience funding in the three markets discussed. Cells describe general practice, not a rule that applies in every case.
| Australia | England and Wales | United States | |
|---|---|---|---|
| Main collective route | Representative proceedings under Part IVA of the Federal Court of Australia Act 1976 (generally opt-out) | Group litigation orders (opt-in), representative actions, and opt-out collective proceedings in the Competition Appeal Tribunal | Class actions under Federal Rule of Civil Procedure 23 (opt-out for damages classes) |
| Who usually arranges funding | The applicant’s lawyers, subject to court oversight | Claimant firms and class representatives | Class counsel |
| What group members are told about funding | Practice Note GPN-CA requires notice of funding charges, disclosure of the agreement to the court, and a funding alert in the opt-out notice | No automatic general duty; disclosure commonly arises at tribunal certification and in security for costs applications | No uniform federal rule; depends on district standing orders and state statutes |
| Court role in deductions | Court approves settlements and can adjust funding returns; common fund orders available at settlement or judgment | Tribunal or court approves settlements and can set a funder’s return, as in the Mastercard collective proceedings | Court reviews fees and settlement fairness under Rule 23(e) |
Sources: Federal Court of Australia, Class Actions Practice Note (GPN-CA); Lexology In-Depth: Third-Party Litigation Funding (Australia and United Kingdom, December 2025); US Federal Rules of Civil Procedure, Rule 23. Descriptions reflect the position as understood in September 2026 and are general rather than case-specific.
A short checklist before you join or stay in a group claim
- Ask for the funding disclosure, and for the identity of the funder if it is not stated.
- Confirm how the funder’s return is calculated-gross or net recovery, capped or uncapped.
- Ask what happens to the claim if the funder stops providing capital.
- Check whether you are covered for adverse costs, and by what mechanism.
- Note the opt-out or registration deadline, and keep proof of any step you take.
- Ask how settlement funds will be distributed and what happens to unclaimed amounts.
Frequently asked questions
Do I owe the funder anything if the claim loses?
Under a non-recourse structure, group members generally owe nothing to the funder if the claim fails, and the funder absorbs the capital it invested. The position can differ if your own agreement says otherwise, or if the court makes an adverse costs order that is not covered by an indemnity.
Who decides how much the funder is paid?
It depends on the funding agreement and on the court or tribunal. Some regimes let the court or tribunal set or adjust a funder’s return when it approves a settlement; others give effect to the agreement unless a challenge succeeds. This is one of the areas where jurisdictions differ most.
Will I be told that my case is funded?
Often, but not always. Australia’s Class Actions Practice Note requires disclosure of funding charges to group members and the court, while the United States has no uniform federal rule and England and Wales has no automatic general duty. Ask the lawyers handling the matter for the funding disclosure directly.
Does the funder control the litigation?
Funding agreements generally state that the funder does not direct litigation strategy or decide whether to settle, and professional conduct rules protect the client’s authority over those decisions. Terms vary, however, and courts have examined how much influence a funder’s contractual rights give it in practice.
Can I leave a funded group claim?
In opt-out regimes you can usually opt out by the deadline set by the court, which ends your participation and your share of any recovery. In opt-in regimes, you participate only by joining. Deadlines are strict and are set out in the notice you receive.
Is a funded claim more likely to settle?
No general answer applies. Funding can allow a claim to be litigated further than the group could otherwise afford, and it can also mean the funder’s return has to be accounted for in any settlement. Whether a particular case settles depends on the merits, the evidence, the parties, and the forum.
How this article was put together
This guide set out to answer a practical question for people who are already part of, or considering joining, a funded group claim: who pays, what you are told, and how a recovery is divided. It draws on the Australian Law Reform Commission’s 2018 report, the Federal Court of Australia’s Class Actions Practice Note, the Competition Appeal Tribunal’s 2025 Mastercard settlement decision as reported in 2026, and current market commentary collected in September 2026. Where rules differ by jurisdiction or depend on individual agreements, the text says so rather than generalising. Funding regulation is changing quickly, so the regulatory details here should be rechecked before being relied on.
