A sharp rise in the availability of third-party funding has triggered a wave of speculative FTSE shareholder lawsuits as investors move to cash in on claims of corporate wrongdoing.

Over the past year, multiple blue-chip companies — including gambling giant Entain, tobacco producer British American Tobacco (BAT), and fast fashion retailer Boohoo — have been summoned before the High Court after a series of law firms launched group claims on behalf of institutional investors.

Third-party litigation funding, in which an outside funder finances the cost of a claim in return for a share of any recovery, has grown into a multibillion-pound global industry, and its expansion in London has lowered the barrier for institutional investors to pursue claims they might previously have written off as too costly or risky.

Following the surge in activity at the Competition Appeal Tribunal (CAT) — which has become a hub for opt-out collective actions, most prominently in the standalone competition claims that followed the Mastercard and Visa interchange fee litigation — litigation funding has become increasingly integral to dispute resolution departments, driving a strategic focus on originating large-scale, high-value cases. The funding market's position was bolstered by legislation passed in 2025 restoring funders' ability to take returns based on a percentage of damages, after the Supreme Court's 2023 PACCAR ruling had held that such agreements amounted to damages-based agreements regulated under the Courts and Legal Services Act.

Aymen Mahmoud, London managing partner of McDermott, said: "The direction of travel in securities litigation is increasingly clear. London has deep capital markets, sophisticated institutional investors, a highly developed disputes system and an increasingly mature funding ecosystem."

From Trickle to Torrent

FTSE 100-listed Entain is the latest to face a new filing, after Morgan, Lewis & Bockius issued legal proceedings on Tuesday on behalf of a group of investors. The company also faces similar securities claims from investors represented by City-based law firm Fox Williams.

The shareholders' action, filed under sections 90 and 90A of the Financial Services and Markets Act 2000 (FSMA) — provisions that impose liability on issuers for misleading statements or omissions in listing particulars and published information — centres on Entain's deferred prosecution agreement (DPA) with the Crown Prosecution Service (CPS), under which the company agreed to pay a £585m penalty over historic bribery and corruption in its former Turkish business between 2011 and 2017. DPAs have increasingly been followed by civil shareholder claims, as regulatory admissions can anchor allegations that markets were misled.

The trial is not expected to begin until 2029, however, as the civil court is waiting for related criminal trials involving former Entain executives to conclude between 2028 and 2029.

London-listed BAT is facing group lawsuits in the High Court from shareholders alleging the company failed to disclose breaches of US sanctions related to its historical operations in North Korea. Stewarts Law and Fox Williams have filed claims on behalf of investors, with McDermott Will and Schulte the latest to join, launching its legal proceedings last Friday.

Fox Williams also brought a group action against Boohoo Group on behalf of institutional investors seeking up to £245m in compensation over the 2020 Leicester factory labour scandal. The shareholders alleged that Boohoo made misleading statements or omitted crucial details, failing to properly disclose poor working conditions and underpayment of workers in its UK supply chain. That case is expected to go to trial in October 2027.

Speaking to City AM, Andrew Hill, partner at Fox Williams, noted that while the frequency of cases might have seemed like a slow trickle in recent years, these complex claims naturally take a long time to build and to move through a relatively slow court system. Even so, he had observed an uptick in such claims.

Rory Spillman, partner at Signature Litigation, added that the surge in cases "has also been assisted by the recent procedural clarifications that have been generated by the increase in the number of cases that are going through the court and which have addressed various case management and other issues relating to these types of cases."

This growing capacity for complex litigation was recently tested by the Russian aviation "mega-trial," an extraordinarily large High Court dispute that had to be consolidated into six actions involving 13 legal teams and up to 70 barristers.

For issuers and their directors, the trend signals rising litigation risk attached to regulatory settlements and disclosure failures, and upcoming rulings in the Entain, BAT and Boohoo cases are likely to shape how future FSMA securities claims are pleaded and funded.

Emma Ruane, partner at Peters and Peters, cautioned that one question likely to become increasingly important in these cases is what shareholders actually knew, or cared about, at the point they invested.

"In particular, the courts may need to grapple with how significant issues such as bribery, corruption or other alleged misconduct were to an investor's original decision-making, rather than simply assessing their significance with hindsight," she said.