The Future Of Litigation Funding Post PACCAR

On 19 March 2024, the Ministry of Justice published draft legislation to reverse the Supreme Court's controversial July 2023 decision in R (on the application of PACCAR Inc) v Competition Appeal Tribunal [2023] UKSC 28 (PACCAR), where it was held that litigation funding agreements (LFAs) can be damages-based agreements (DBAs) in circumstances where the funder plays no part in the conduct of the litigation but their remuneration is based on a percentage of any damages recovered.

Crucially, DBAs are rendered unenforceable if they do not comply with the relevant regulatory regime. This regime imposes various restrictions and caps on what a DBA can require a funding recipient to pay to a funder in the event that their claim is successful. A DBA will also always be unenforceable in opt-out collective proceedings in the Competition Appeal Tribunal (CAT), even if the agreement complies with the DBA regulatory regime.