Innsworth Loses Judicial Review Challenge to Mastercard Settlement

Why It Matters

The decision clarifies the limits on litigation funder returns in UK class actions, reinforcing that settlements should chiefly benefit claimants. It also signals to funders that overly generous profit expectations may be curtailed, potentially affecting financing of future large‑scale consumer suits.

Key Takeaways

• High Court upholds CAT's 50% profit cap for funder
• £200m settlement (~$256m) split: $128m to claimants, $52‑59m to funder
• Innsworth sought $229m but received only $62m profit
• Ruling emphasizes class benefit over funder returns in UK collective actions
• ATJF to manage remaining funds for consumer advice organisations

Pulse Analysis

The protracted Mastercard interchange‑fee case, brought by consumer advocate Walter Merrick, culminated in a £200 million (about $256 million) settlement after more than eight years of litigation. The claim alleged that Mastercard’s multilateral interchange fees violated competition law, with initial damage estimates soaring to £14 billion (≈$18 billion). To shoulder the massive costs, Merrick’s team enlisted Innsworth Capital, a litigation funder that fronted roughly £45 million (≈$58 million) in expenses. Such funding arrangements have become common in UK collective proceedings, allowing claimants to pursue high‑stakes actions without upfront capital.

In a Divisional Court judgment, Lord Justice Males upheld the Competition Appeal Tribunal’s (CAT) allocation scheme, which reimbursed Innsworth’s outlay and granted a profit equal to 50 % of that expenditure. The CAT’s three‑pot structure earmarked about $128 million for class members, $52‑59 million for the funder’s costs, and the balance for the Access to Justice Foundation. By rejecting Innsworth’s claim to $229 million of undistributed proceeds, the court reinforced the principle that collective actions should primarily benefit the class, not funders, and that profit caps are permissible.

The ruling sends a clear signal to the UK litigation‑funding market: excessive returns will be scrutinised, and tribunals possess broad discretion to balance fairness with the need to attract capital. Funders may now calibrate their fee structures, potentially favouring lower‑risk, higher‑certainty cases. For claimants, the decision offers reassurance that settlement proceeds will flow to consumers rather than being siphoned off. Observers note that the UK approach contrasts with the United States, where funder fees often exceed 30 % of recoveries, highlighting a more claimant‑centric trajectory in British class actions.