The Future of Litigation Funding: Further Delays and Uncertainties

In March 2024, we commented on the announcement from the Conservative government at the time that it would be introducing legislation, Litigation Funding Agreements (Enforceability) Bill (“the PACCAR Bill”) which sought to clarify the distinction between litigation funding agreements (“LFAs”) and damage-based agreements (“DBAs”) and restore the enforceability of LFAs without the need for any additional regulatory compliance.

The PACCAR decision considered the question of whether LFAs were, by definition, DBAs. In order for a DBA to be enforceable, certain conditions must be met and these are laid down in the Damage-Based Agreement Regulations 2013; more detail on the judgment can be found here.

Following the announcement in May 2024 that the UK would be holding a General Election on 4 July 2024 the PACCAR Bill, which was only at the report stage at that time, did not pass through Parliament before it was prorogued and we reflected in June 2024 that it would be interesting to see where the PACCAR Bill featured once the new Government had prioritised its legislative agenda.

We now know that the PACCAR Bill will not be reintroduced until the Civil Justice Committee has completed its funding review in 2025, as stated by Justice Minister Lord Ponsonby when questioned on the topic by Lord Sandhurst.

Lord Ponsonby stated the government “recognises the critical role third-party litigation funding plays in ensuring access to justice”.

Lord Ponsonby said “Following the PACCAR judgment, concerns have been raised about the need for greater regulation of litigation funding agreements, or greater safeguards for claimants.

“The government is keen to ensure access to justice in large-scale and expensive cases, whilst also setting up adequate safeguards to protect claimants from unfair terms.

“The Civil Justice Council is considering these questions and others in its review of third-party litigation funding, and hopes to report in summer 2025. The government will take a more comprehensive view of any legislation to address issues in the round once that review is concluded.”

Steve Beahan, Commercial Dispute Resolution Partner comments:

“The further delay to clarity on the distinction between LFAs and DBAs which the PACCAR Bill promised is disappointing.

“It leaves the funding industry in a state of flux and raises queries for claimants who will be uncertain on the proportion of damages they are entitled to receive depending on how the funding agreement their claim is funded under is to be viewed in light of the PACCAR judgment.

“Whilst clarity and tighter regulation is welcome, it appears that this will not be forthcoming in the imminent future and remains a case of watch this space”.

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