As we begin 2026, our partners share their predictions on some of the key litigation and disputes themes and trends for the year ahead.
Please contact us or reach out to your usual Pallas relationship partner if you have any questions or would like further information on these topics.
ESG Claims and Litigation Funding Driving Win-Win Outcomes
ESG-related claims – from climate liability actions to governance disputes – may become of renewed interest to a broader range of third-party litigation funders in 2026 and beyond. Litigation funding is maturing into a core pillar of corporate redress litigation where monetary damages are available, attracting interest not only from specialist funds but also from mainstream litigation finance players seeking blended financial returns and social outcomes.
In the UK, this anticipated shift in interest unfolds against a maturing group claims landscape, benefiting from active case management by an increasingly experienced judiciary. The last quarter of 2025 saw the English courts hand down a number of first-instance decisions demonstrating tangible outcomes for commercial funding backers. Notably, the CAT delivered its first successful judgment for a class representative in an opt-out collective competition action against Apple, while the High Court found BHP liable for damage arising from the Fundão dam collapse, a claim brought on behalf of more than 600,000 claimants.
As anticipated legislation moves closer to addressing the Civil Justice Council’s post-PACCAR recommendations and restoring certainty to the litigation funding market, these trends increasingly support a win-win outcome — improving access to justice, strengthening ESG accountability, and delivering risk-adjusted return profiles for a broader range of funders.
AI in Litigation: A Judicial and Regulatory Priority for 2026
While the debate rages on over AI’s benefits and dystopian risks, 2025 saw increasing scrutiny on AI’s role in legal disputes. This was spurred by the use of ChatGPT and other generative AI systems, as well as the increasing popularity of disclosure tools such as Technology Assisted Review (TAR).
Key 2025 developments included:
- Cases spotlighting the serious risks and sanctions relating to unverified AI-led research (Ayinde and Al-Haroun)
- First reports of AI use by judges to summarise documents (e.g., VP Evans v HMRC)
- Guidance for Judicial Office Holders on AI, in addition to guidance to practitioners from The Law Society and BSB
- The Civil Justice Council’s working group established to examine the use of AI by legal representatives for preparing Court documents
- The SRA-approved first purely AI-based law firm (Garfield.Law)
As 2026 takes pace, we predict appropriate and reliable use of AI in litigation will be a key judicial and regulatory priority for the English Courts, allowing parties to harness efficiencies while ensuring professional duties are adhered to. We expect heightened AI vigilance, including:
- Expanded judicial and regulatory guidance governing AI use in submissions and disclosure
- Consideration of enhanced professional rules, including potential reviews into amendments to the Civil Procedure Rules
- Emphasis on human input and supervision (even in the face of more sophisticated AI tools)
Disclaimer: this post was written by a lawyer, not a robot.
Shareholder Disputes will Dominate the Next Wave of UK Mid-Market Litigation
By Nick Turvey
2026 will see a sharp rise in shareholder disputes with three-cornered fights between sponsors, management and lenders.
Unitranche structures, aggressive covenant packages and “quasi-equity” debt are blurring the line between creditor and shareholder. When performance softens or exits stall, those blurred lines will be tested – in valuation challenges, drag/tag disputes, and claims over who really controls the company when money gets tight.
Many proceedings started in 2026 won’t necessarily be about whether deals were done; they’ll be about who owns the upside, who carries the downside, and who gets the last word when it becomes inconvenient to continue ignoring ambiguities in the contracts that went unspoken during the good times.