Update on the Litigation Funding Agreements (Enforceability) Bill

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To update you following our previous post, the Litigation Funding Agreements (Enforceability) Bill is now at the committee stage in the House of Lords, who sat yesterday to consider the same.

For those of you who missed our previous post (or need a recap), the purpose of the bill is to overturn the decision in the Supreme Court ruling in R (PACCAR) v Competition Appeal Tribunal [2023] UKSC 28 (PACCAR) that litigation funding agreements (LFAs) were damages-based agreements (DBAs) making them unenforceable. The Bill will reverse the decision by amending the definition of a DBA under Section 58AA(a)(a) of the Courts and Legal Services Act 1990 (CLSA) to specify that LFAs are not DBAs.

An LFA is a type of agreement where a third-party funder finances part of the claimant’s legal costs, in return for a percentage of damages awarded, so the parties’ legal representative (either a lawyer or claims management company) will only be paid if the claim is successful. The purpose of the Bill is to promote access to justice by continuing to allow claimants to use LFAs to access legal funding where they cannot afford the legal fees themselves in the first instance.

To prevent uncertainty surrounding LFAs agreed before the PACCAR judgement, where the claim they concern will come to an end after the Bill comes into law, the Bill is also retrospective in nature.

More generally, the Civil Justice Council (CJC) is commencing a review of third-party litigation funding to consider regulation of the market, with an interim report expected this summer, and a full report by summer 2025, considering access to justice and the effectiveness and regulatory functions regarding third-party funding, assessing where change is necessary.

Link: Litigation Funding Agreements (Enforceability) Bill [HL] – Parliamentary Bills – UK Parliament

This article is for general purpose and guidance only and does not constitute legal advice. Specific legal advice should be taken before acting on any of the topics covered. No part of this article may be used, reproduced, stored or transmitted in any form, or by any means without the prior permission of Brecher LLP.

Katie Richardson

Trainee Solicitor

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