Litigation funder Innsworth Capital has launched judicial review proceedings against the Competition Appeal Tribunal’s (CAT) approval of the £200m settlement in the landmark Merricks v Mastercard collective action over credit card fees.

The funder, which backed Merricks as class representative but then bitterly challenged the settlement – arising from a claim once valued at £14bn – is now contesting the distribution mechanism set out in the May CAT ruling endorsing the deal, arguing that it fails to deliver a sufficient return on its investment.

Innsworth argues that the tribunal made a series of legal and procedural errors, particularly in allocating more than £30m to the Access to Justice Foundation (ATJF) while capping its own return at £22.8m – equating to just 0.5× its £45.6m investment.

Under the settlement structure, £100m is earmarked for direct payments to class members, with a further £45.6m allocated to cover Innsworth’s costs. Innsworth’s return is drawn from a third pot of £54.4m, the balance of which will either supplement class member payments – if take-up exceeds 5% – or be donated to the ATJF, which intervened in the case.

The funder contends that the CAT misapplied Australian case law in determining its return and failed to properly consider the terms of its funding agreement, the market value of its services and the net proceeds of the litigation.

It also claims procedural unfairness, alleging it was denied a fair opportunity to respond to the tribunal’s proposed distribution and that errors of law were made in respect of reimbursement.

At the heart of the dispute is whether Innsworth’s return should be limited to its investment plus 50%, or whether some or all of the £30m earmarked for the ATJF should be redirected to compensate the funder for the financial risk it assumed.

Innsworth contends the tribunal misinterpreted the very case law it cited, arguing that a return of 1.5× its investment was supported by precedent. In court papers published online, the funder stated: “Innsworth, having taken the entirety of the risk including the complete loss of all its investment… will receive as its profit less than one‑sixth of that amount, and a return far below anything contemplated in the [agreement].”

However, Jeremy Marshall, chief investment officer at Winward Litigation Funding, welcomed the review, calling it “an important opportunity to seek clarity on how the CAT assesses what is an appropriate return for litigation funders, without whom there would be no settlement or distribution of damages”.

Boris Bronfentrinker, the partner at Willkie Farr & Gallagher who led the team acting for class representative Walter Merricks, said it was significant that Innsworth had not “sought to revive its ill‑considered and misconceived attempts to prevent the settlement”.

He added: “The very same greed that caused Innsworth to take the poorly thought through decision to oppose the settlement is now driving its attempt to judicially review the tribunal’s decision – a review that seeks to award Innsworth more than the class.”

Referring to the Civil Justice Council (CJC) final report on reforming litigation funding, published on 3 June, he said: “It is a shame that at a time when the spotlight is on litigation funders following the report of the CJC, Innsworth is acting in a way that only provides ammunition to those that want to argue against the regime.”

The ATJF, which was represented pro bono, said: “It would be inappropriate to comment on the case at this time. Our focus remains on our work and ensuring the money we receive is distributed through grants to organisations and charities which support the most vulnerable in the UK.”

The CJC’s final report, published on 3 June, calls for a “light-touch” statutory regulatory regime for litigation funders – replacing the current voluntary code – and urges urgent legislation to reverse the Supreme Court’s 2023 PACCAR ruling that rendered many funding agreements unenforceable.