The Ministry of Justice has announced that the Government will shortly be introducing legislation which seeks to reverse the effect of the decision of the Supreme Court in R (on the application of PACCAR Inc and others) (Appellants) v Competition Appeal Tribunal and others (Respondents) [2023] UKSC 28 (“PACCAR”), breathing life back into litigation funding agreements (“LFAs”).

Many feared that PACCAR could deal a fatal blow to the litigation funding industry as the Supreme Court held that any LFAs under which the funder receives a share of the damages awarded are “Damage-Based Agreements” and, as such, must comply with the Damages-Based Agreements Regulations 2013. Given that so many LFAs in existence at the time of the judgment did not comply with these regulations, they were quickly rendered unenforceable, and litigation funders were left trying to restructure their agreements. The uncertainty that followed was considerable, and particularly felt in the context of opt-out class actions at the Competition Appeals Tribunal which historically often rely on third party funding.

The recent announcement by the Government seeks to resolve this uncertainty, stating that “today’s news will restore the position that existed before the Supreme Court’s ruling last year, which made many litigation funding agreements unenforceable. As a result, cases can continue being funded”. The announcement also states that the Government is considering options for a wider review of the litigation funding sector which could include introducing increased regulation or safeguards for people bringing claims to court.

Further details about any such review will be set out in due course. In the meantime, the new legislation reversing PACCAR is to be introduced shortly and will apply only to England and Wales.

Read the announcement in full here.