In a previous blog post, we discussed the introduction to Parliament of the Litigation Funding Agreements (Enforceability) Bill (the Bill), which was designed to introduce legislation that would reverse the outcome of the UK Supreme Court’s decision in R (on the application of PACCAR Inc and others) v Competition Appeal Tribunal and others.[1]
As we previously set out, the ruling in PACCAR was set to have significant ramifications for litigation funders, claimants and claimant law firms in the UK that rely on third-party funding, potentially threatening the financial viability of swathes of the litigation funding industry. In PACCAR, the Supreme Court held that litigation funding agreements that entitle funders to be paid a portion of any damages recovered (as opposed to a multiple of the investment made by the litigation funder) are “damages-based agreements”, as defined in the Courts and Legal Services Act, and are therefore unenforceable unless they comply with the relevant regulatory regime.
The Bill proposed amending s58AA of the Courts and Legal Services Act, to insert a provision that “an agreement is not a damages-based agreement if or to the extent that it is a litigation funding agreement”. A litigation funding agreement is then further defined as, in essence, an agreement whereby a person providing a claims management service is funding the whole or part of a person’s legal fees or adverse costs orders in return for a specified payment from that payment. The proposed amendment was to have retrospective effect, thus bringing to an end the various challenges to the enforceability of funding agreements seen since PACCAR.
Following the Prime Minister’s announcement on 22 May 2024 of the UK General Election, Parliament was prorogued on 24 May 2024, and dissolved on 30 May 2024. As the Bill had not yet even started the multi-stage House of Commons process, it did not make it through the so-called “wash up period”, the two-day period between the Prime Minister’s announcement of the election, and the prorogation of Parliament, to rush through draft legislation.
Accordingly, the Bill will not progress any further this side of the General Election in July 2024. Whether it will be a priority of the new Government is not yet clear. In the meantime, however, the decision in PACCAR still stands. As discussed in this blog post, this renders a large number of litigation funding agreements potentially unenforceable.
[1] [2023] UKSC 28.
