Litigation funding agreements bill published

On 19 March 2024, the Litigation Funding Agreements (Enforceability) Bill was published and introduced to the House of Lords, addressing the impact of the Supreme Court’s judgment in PACCAR which held that litigation funding agreements were damages-based agreements and therefore unenforceable. The Bill restores the position that existed before the Supreme Court ruling by carving out litigation funding agreements from Section 58AA of the Courts and Legal Services Act 1990.

The Supreme Court’s judgment in PACCAR [1] has generated more than its fair share of column inches since being handed down on 26 July 2023. The new Litigation Funding Agreements (Enforceability) Bill (the “Bill”) [2] provides welcome clarity on the position for all stakeholders. The Bill follows on from an announcement from the Lord Chancellor on 4 March 2024 which promised new legislation to “help people pursuing claims against big businesses secure funding to take their case to court” and “allow third parties to fund legal cases on behalf of the public in order to access justice and hold corporates to account”. [3] That the Bill has been published just over two weeks from the announcement demonstrates the Government’s intent to move quickly. The Lord Chancellor’s announcement and the policy background contained in the explanatory notes to the Bill [4] both expressly refer to the Post Office Horizon scandal, where third party funding was used to bring the sub-postmasters group action against the Post Office. Stakeholders will no doubt be grateful for campaigner and former sub-postmaster Alan Bates’ call for action, which galvanised action on this issue following a succinct opinion piece in the Financial Times on 12 January 2024.[5]

Section 1(2) of the Bill restores the position that existed before the Supreme Court ruling by providing that “an agreement is not a damages-based agreement if or to the extent that it is a litigation funding agreement.” The Bill goes on to provide a definition of litigation funding agreements. Paraphrased, the definition covers agreements where a third-party funder provides “claims management services” within s58AA of the Courts and Legal Services Act 1990 to: (i) fund the provision of advocacy or litigation services or the payment of costs in proceedings; and (ii) a litigant is to make payment to the funder in circumstances specified in the agreement. While the wording of any litigation funding agreement will need to be scrutinised on a case by case basis, assuming that the Bill is enacted into legislation in due course in its present form then, in principle, there should be no barrier to a funder’s return being calculated on the basis of a percentage of the damages awarded.  

Section 1(4) of the Bill states that the amendments are to be “treated as always having had effect”. This wording also appeared in a proposed clause of the Digital Markets, Competition and Consumers Bill which was also designed to address PACCAR but which was removed on 11 March 2024 to make way for the new Bill. [6] While that removed clause would have mitigated uncertainty in relation to opt-out collective actions only; the Bill deals with litigation funding of all types of cases, which will be particularly welcome to a broad range of practitioners and stakeholders.


[1] R (on application of PACCAR Inc) v Competition Appeal Tribunal [2023] UKSC 28.