More than 3 years after the Supreme Court’s decision in R (PACCAR Inc and others) v Competition Appeal Tribunal [2023] UKSC 28, litigation funding remains in a state of flux. The court held that litigation funding agreements (LFAs), under which a funder’s return was calculated by reference to a percentage of damages, fall within the statutory definition of damages-based agreements (DBAs). That was because most LFAs did not comply with the DBA Regulations (as it was generally considered that LFAs were not DBAs) and, because DBAs are prohibited in opt-out collective proceedings before the Competition Appeal Tribunal, the decision destabilised a funding model on which many complex claims depended.
The Civil Justice Council’s (CJC) final report in June 2025 proposed a solution to reverse PACCAR by legislation, clarify that litigation funding is not a claims-management service for these purposes and create proportionate statutory regulation of litigation funding. The Government subsequently accepted proposals to reverse PACCAR by legislation and include regulation of funders but declined the recommendation for legislation with retrospective effect. Instead, the Government promised legislation with prospective effect “when parliamentary time allows”. At present, it is unknown when Parliament will implement reforms.
The key takeaways following the CJC 2025 report are:
- Reversing PACCAR: The legislation will exclude LFAs from the definition of DBAs, confirming that they need not comply with the DBA Regulations and restoring the distinction between litigation funding and contingency fees.
- Regulating litigation funding: The Government plans to implement regulation to replace reliance on voluntary self-regulation, setting minimum standards for fairness, transparency and claimant protection without discouraging legitimate funding.
However, the most serious weakness in the Government’s stated approach is its refusal to legislate retrospectively. A prospective amendment may restore freedom of contract for future LFAs, but it will not validate agreements entered into before the new law takes effect.
The failure to resolve PACCAR is now more damaging than the original shock of the decision. The law’s immediate boundaries are better understood, but the underlying statutory defect remains. The CJC has reported that the Government has accepted the need for action and the courts have done what they can within the existing legislation. What is missing is a priority to resolve PACCAR.
Until Parliament acts, claimants and funders must continue to work around a decision the Government agrees should be reversed. Prospective reform alone will leave a residue of legacy disputes. The indefinite delay in resolving this could prevent claimants from accessing justice and risks undermining the credibility of England and Wales as a centre for dispute resolution.
Photo credit: Krists Luhaers