Beyond Paccar – How should the english litigation funding industry now proceed?

The majority UK Supreme Court judgment in R (on the application of PACCAR Inc and others) (Appellants) v Competition Appeal Tribunal and others (Respondents) [2023] UKSC 28, 26 July 2023, (Paccar) has come as a surprise to many.

Until now, the litigation funding industry had assumed that Litigation Funding Agreements ( LFAs) were not Damages Based Agreements (DBAs), and, therefore, were not impacted by legislation applicable to DBAs.

However, the Paccar judgment has reversed this common understanding, by concluding that LFAs entitling funders to payment based on the level of damages recovered are unenforceable: (i) if they are used to fund opt-out collective proceedings before the Competition Appeal Tribunal (CAT) (as to which see Section 47C(8) of the Competition Act 1998, which states that damages-based agreements are “unenforceable” to the extent they relate to “opt-out collective proceedings” before the CAT); or (ii) “unless they comply with the DBA regulatory regime” [Emphasis added]. 

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