Government proposals for dealing with the fall-out from the Supreme Court’s surprise ruling on litigation funding last summer have come under fire from the sector for not going far enough. In a ruling described as ‘catastrophic’ for the litigation funding sector, the Supreme Court found in July that a funding agreement in PACCAR, a truck cartel case, fell within the statutory definition of damages-based agreements (DBAs). As it had been entered in to without satisfying conditions for DBAs, it was therefore unenforceable. 

Following intense lobbying by the sector the government responded by shoe-horning an amendment to the Digital Markets, Competition and Consumers Bill, currently going through the Commons. 

However specialist lawyers said the amendment as moved will not solve the problem. 

Richard Pike, partner at international firm Fieldfisher, said the amendment does not reverse the judgment. The amendment states that a litigation funding agreement that provides for a percentage of damages will not be a DBA if in relation to opt-out collective proceedings, he said. 'But it will still be a DBA if in relation to any other type of proceedings.'

This is because the measure amends section 47C(9) of Competition Act 1998 rather than what Pike described as 'the real issue', section 58AA of the Courts and Legal Services Act 1990. 'The net result is that the Road Haulage Association would still have lost in the Supreme Court even if this amendment had been made beforehand,' he said. 

Jonathan Barnes, director of the Association of Litigation Funders, agreed that the amendment was inadequate: 'We welcome that the government has recognised the need to take urgent action to ensure that consumers and businesses continue to have effective access to justice. However, this amendment only represents a partial fix to the problem, as it does not address cases heard outside of the Competition Appeal Tribunal.

'If left unaddressed, we believe that this will have a significant impact on the UK’s attractiveness as a legal centre, and we are seeking to engage with the government to ensure that the UK remains a world leading centre for effective enforcement of consumer and competition law.'

The Digital Markets, Competition and Consumers Bill, which is mainly focused on tackling market distortions in 'big tech', is due to have its report stage and third reading on Monday.