Can a litigation funding agreement be unenforceable?

Yes, in some jurisdictions and circumstances. Where champerty is still prohibited, a court can refuse to enforce an agreement that gives a non-party a share of the recovery, leaving the funder without its return. Other rules can have a similar effect: in July 2023 the UK Supreme Court in PACCAR held that agreements paying funders 'based on the amount of damages recovered' are damages-based agreements that must comply with the 2013 regulations 'or risk being deemed unenforceable,' per Burford's 2025 10-K.

How many US states still restrict champerty?

It varies, and the picture changes. GAO's December 2022 report cites a New York City Bar Association working group finding that 28 jurisdictions permit maintenance (with limitations) and 16 explicitly allow champerty, and says many states have relaxed these prohibitions. Some states have abolished the doctrine by court decision or limited it by statute, others still apply it, and the answer can depend on the type of claim and agreement.

What happened after PACCAR?

Uncertainty and reform proposals. Burford's 10-K says a March 2024 bill to restore the earlier position lapsed when Parliament was dissolved in May 2024; in summer 2025 the Civil Justice Council recommended reversing PACCAR; and in December 2025 the UK government announced its intention to do so, with 'timing and detail' unclear as of the 10-K. Agreements written as multiples of capital rather than percentages of damages are less affected.

Is this only a historical concern?

No. The doctrines are less often fatal than they were, but they still shape how agreements are drafted: funders avoid controlling the litigation, structure returns as multiples, choose governing law carefully and sometimes avoid jurisdictions where the doctrine is strong. Burford's 10-K says 'a minority of US states have some regulations applicable to the commercial legal finance industry.'

How do courts look at funder control?

Control is often what turns acceptable funding into objectionable maintenance. That is one reason commercial funders stress that clients control their cases: Burford's agreements 'explicitly state that control of litigation and arbitration decision-making remains with the client,' and all seven commercial funders GAO interviewed said they did not decide litigation strategy.

What should an investor check?

Which law governs each funding agreement, whether the forum still applies champerty or similar rules to the claim type, whether the return is a percentage of damages that a rule like PACCAR could catch, and whether counsel's opinion on enforceability was obtained. A fund with many agreements under one governing law carries that law's risk across the book.

Champerty and Maintenance

Litigation Finance & Legal Claims

Definition

Maintenance is helping another party bring or pursue a lawsuit; champerty is maintenance in return for a share of the outcome; barratry is a continuing practice of either. GAO, citing the Supreme Court in In re Primus (1978), says these doctrines 'were incorporated into the laws of many states at the time of the nation's founding' and limited the growth of third-party funding until many states began to relax them. Where they still apply, a funding agreement can be void or unenforceable.

Why it matters

Champerty and maintenance are the oldest legal risk in litigation finance: the risk that the funding agreement itself cannot be enforced. Most commercial funding now operates where the doctrines have been relaxed or do not apply to sophisticated parties, but they have not disappeared, and newer rules can create the same result, as PACCAR showed in the UK in 2023. An unenforceable agreement turns a funder's entitlement into, at best, a negotiation. For an investor, this is a portfolio-wide legal risk tied to governing law and return structure. Ask what law governs the fund's agreements, what enforceability advice supports them, and how much of the book uses percentage-of-recovery returns.

Common misconceptions

•Champerty is not abolished everywhere, because GAO's sources found it explicitly allowed in only 16 US jurisdictions.
•Enforceability risk is not only about champerty, because PACCAR made some UK agreements vulnerable under the damages-based agreements rules.
•Relaxed doctrines are not settled law, because legislation and court decisions can change the position, as the UK's 2023 to 2025 history shows.
•Funder control is not a neutral term, because control of the case is often what courts weigh in deciding whether funding is improper.
•A multiple-based return is not immune to every rule, but it avoids the specific problem PACCAR created for percentage-of-damages returns.

Technical details

Worked example (illustrative): an agreement found unenforceable

Funder deploys $3.0 million for 30% of recovery.

Claim settles for $20.0 million: the agreement entitles the funder to $6.0 million.

The claimant challenges the agreement as champertous, or as a non-compliant damages-based agreement.

If upheld, the funder may recover nothing, or only what a court or a negotiated settlement allows.

A $3.0 million return on a won case becomes a dispute, regardless of the merits of the underlying claim.

Doctrines and rules that can affect enforceability

Maintenance: supporting another's litigation.

Champerty: maintenance for a share of the proceeds.

Barratry: a continuing practice of either.

Damages-based agreement rules (England and Wales, after PACCAR, July 2023).

Consumer funding statutes and disclosure rules in some US states.

What AltStreet's reviews and filings show

GAO-23-105210 (December 2022): definitions from In re Primus (1978); the New York City Bar report it cites counts 28 jurisdictions permitting maintenance with limitations and 16 explicitly allowing champerty; many states have relaxed the prohibitions.

Burford 2025 10-K: PACCAR (July 2023); a 2024 bill lapsed; Civil Justice Council report (summer 2025); UK government intention to reverse (December 2025); the European Commission will not advance EU-wide legislation (December 2025).

Burford 2025 10-K: a minority of US states regulate commercial legal finance.

AltStreet could not retrieve Burford's own champerty note, the Minnesota Supreme Court's 2020 opinion or New York Judiciary Law 489 from their sites on November 9, 2026; this page does not rely on them.

Questions about enforceability

What law governs each funding agreement?

Does the forum still apply champerty or maintenance to this claim type?

Is the return a percentage of damages, and could damages-based agreement rules apply?

Has counsel given an enforceability opinion?

What share of the fund's agreements depend on one jurisdiction's law?

How investors apply the term

Investors usually apply this term by tying the definition back to the controlling documents and then asking which cash flows, rights, restrictions, or valuation assumptions it changes. A useful review looks at the term alongside fees, leverage, liquidity, reporting frequency, and manager discretion rather than treating it as a standalone concept.

The practical diligence test is simple: identify who benefits if the assumption is wrong, who has control when conditions change, and what evidence the investor receives after closing. Terms that cannot be reconciled to documents, cash movements, and monitoring data should be treated as marketing shorthand until proven otherwise.

Frequently asked questions

Can a litigation funding agreement be unenforceable?: Yes, in some jurisdictions and circumstances. Where champerty is still prohibited, a court can refuse to enforce an agreement that gives a non-party a share of the recovery, leaving the funder without its return. Other rules can have a similar effect: in July 2023 the UK Supreme Court in PACCAR held that agreements paying funders 'based on the amount of damages recovered' are damages-based agreements that must comply with the 2013 regulations 'or risk being deemed unenforceable,' per Burford's 2025 10-K.
How many US states still restrict champerty?: It varies, and the picture changes. GAO's December 2022 report cites a New York City Bar Association working group finding that 28 jurisdictions permit maintenance (with limitations) and 16 explicitly allow champerty, and says many states have relaxed these prohibitions. Some states have abolished the doctrine by court decision or limited it by statute, others still apply it, and the answer can depend on the type of claim and agreement.
What happened after PACCAR?: Uncertainty and reform proposals. Burford's 10-K says a March 2024 bill to restore the earlier position lapsed when Parliament was dissolved in May 2024; in summer 2025 the Civil Justice Council recommended reversing PACCAR; and in December 2025 the UK government announced its intention to do so, with 'timing and detail' unclear as of the 10-K. Agreements written as multiples of capital rather than percentages of damages are less affected.
Is this only a historical concern?: No. The doctrines are less often fatal than they were, but they still shape how agreements are drafted: funders avoid controlling the litigation, structure returns as multiples, choose governing law carefully and sometimes avoid jurisdictions where the doctrine is strong. Burford's 10-K says 'a minority of US states have some regulations applicable to the commercial legal finance industry.'
How do courts look at funder control?: Control is often what turns acceptable funding into objectionable maintenance. That is one reason commercial funders stress that clients control their cases: Burford's agreements 'explicitly state that control of litigation and arbitration decision-making remains with the client,' and all seven commercial funders GAO interviewed said they did not decide litigation strategy.
What should an investor check?: Which law governs each funding agreement, whether the forum still applies champerty or similar rules to the claim type, whether the return is a percentage of damages that a rule like PACCAR could catch, and whether counsel's opinion on enforceability was obtained. A fund with many agreements under one governing law carries that law's risk across the book.