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New Government Bill to Reverse Supreme Court’s Decision on Litigation Funding

The Litigation Funding Agreements (Enforceability) Bill was introduced to Parliament this week, following the UK government’s announcement earlier this month that it would introduce legislation that would reverse the outcome of the UK Supreme Court’s recent decision in R (on the application of PACCAR Inc and others) v Competition Appeal Tribunal and others.[1]

In PACCAR, a part of the well-known “Trucks” litigation in the Competition Appeal Tribunal (CAT), the Supreme Court held that litigation funding agreements (LFAs) 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” (DBAs), as defined in the Courts and Legal Services Act, and were therefore unenforceable unless they complied with the relevant regulatory regime (DBA Regulations 2013).

The ruling in PACCAR was set to have significant ramifications for litigation funders, claimants and claimant law firms in the UK which rely on third-party funding, potentially threatening the financial viability of swathes of the litigation funding industry. Typically, LFAs have been structured as the greater of a multiple of monies invested by the funder and a percentage of damages recovered. This percentage element is

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Provision to Curb “Torpedo Actions” also Applies to Asymmetrical Jurisdiction Agreements

In summer 2021, the German Federal Court of Justice ruled on a dispute between the insolvency administrator of the airline Air Berlin and its main shareholder Etihad Airways over millions in damages that had been going on for several years.

From a procedural point of view, the Federal Court’s findings on so-called “torpedo actions” are of particular importance, further limiting the scope of application of this litigation tactic.

A torpedo action is essentially an action that pre-empts an expected action by the other party in order to block it. A torpedo action is usually filed in a jurisdiction that promises either favorable case law or a particularly long duration of proceedings. This can considerably delay a legal dispute.

This is made possible by the principle of priority that applies to cross-border disputes and the jurisdiction of different courts. According to this principle, an action brought first before a competent court blocks all subsequent actions with identical subject matter before another court. If this torpedo action is brought in a less efficient jurisdiction with notoriously slow-working courts, the opponent’s action can be delayed by several years in some cases.

In order to put a stop to this abuse of rights, the

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