In a welcome announcement today, the government has said it will introduce legislation to overturn the Supreme Court decision in PACCAR Inc & Ors, R (on the application of) v Competition Appeal Tribunal & Ors [2023] UKSC 28.

That held that a litigation funding agreement (LFA) which requires payment to a third party funder based on a percentage of damages constitutes a Damages Based Agreement (DBA) and so must comply with the DBA Regulations in order to be enforceable. 

The problem is that many existing LFA’s do not comply with the DBA Regulations leading to concerns about their enforceability and there has been widespread concern that LFA’s can ever be drafted to comply with the DBA Regulations.

This has proven to be a significant concern for the burgeoning litigation funding market, with implications for access to justice. 

The government's press release announced a “New law to make justice more accessible for innocent people wronged by powerful companies”. Certainly the impact of PACCAR would have been felt by “innocent people wronged by powerful companies” looking for funding in order to be able to challenge such wrongs. However, PACCAR extended not just to innocent people wronged by powerful companies but to all claimants in litigation and international arbitration, as PACCAR applied across the board. Overturning PACCAR will benefit all litigants and will bring stability back to the litigation funding market. 

The government has said that it is also considering a wider review of the litigation funding sector, raising the possibility of looking at regulation of the market.