The Ministry of Justice today pledged to come forward with legislation reversing the PACCAR ruling on litigation funding. A new bill will clarify that litigation funding agreements are not damages-based agreements.
The legislation, to be introduced 'when parliamentary time allows', is intended to introduce safeguards for collective action proceedings to be brought against rich and powerful opponents. It also aims to bring stability to the litigation funding sector after the 2023 Supreme Court ruling in PACCAR.
The MoJ said this judgment, which classed third-party funding arrangements as ’damages-based agreements’, made it harder to access to funding and has resulted in a drop in collective actions.
Sarah Sackman, minister for courts and legal services, said: ‘The Supreme Court ruling has left claimants in unacceptable limbo, denying them of a clear route to justice. Without litigation funding, the sub-postmasters affected by the Horizon IT scandal would never have had their day in court. These are David vs Goliath cases, and this government will ensure that ordinary people have the support they need to hold rich and powerful organisations to account. Justice should be available to everyone, not just those who can afford it.’
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The government is also concerned to retain the UK’s status as a global leader in dispute resolution, with the legal services industry being worth £42.6bn a year to the economy.
As well as the PACCAR element, the government will also bring into law a new framework to ensure that agreements are fair and transparent.
These changes follow a review by the Civil Justice Council (CJC), published earlier this year. The government will continue to consider the other recommendations set out in the CJC review.
David Greene, head of commercial disputes & class actions at Edwin Coe, commented: 'Reversing PACCAR will be a welcome step in restoring certainty to the litigation funding market and reopening routes to justice that have effectively been closed for many claimants. The Civil Justice Council recommended this change as funding plays a critical role in complex, high-value claims, especially in cases where there is a clear imbalance of power. As the Legal Services Minister says these are "David v Goliath" cases and having been involved in many of them, even David needs some ammunition to fight Goliath. That said, as ever, any reform must be accompanied by robust safeguards to ensure funding arrangements are transparent, proportionate and genuinely operate in the interests of claimants.'
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