Labour government moves to protect litigation funding
The UK government plans to legislate to reverse the impact of a Supreme Court judgment on the litigation funding industry.
The top court ruled in a 2023 case, known as PACCAR, that percentages of damage recovered were not enforceable. This ruling threw the litigation funding industry into uncertainty, as it brought its funding into the court’s spotlight.
The litigation funding lobby pushed the previous government to adopt the Litigation Funding Agreements Bill until it was dropped following the last year’s general election.
The funders are behind the rise in class actions in the UK, which reached £135bn in 2024.
A report in October by the Adam Smith Institute (ASI) outlined the extent to which proliferation of this form of litigation damaged the private sector’s confidence and resulted in “enormous” settlement bills.
Its authors called for consistent regulation of litigation funders, holding the sector “to the same rules and standards as other investments”.
However, today, minister for courts Sarah Sackman KC, revealed the government will take action by reversing the Supreme Court ruling to clarify that Litigation Funding Agreements are not Damages-Based Agreements.
She said: “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,” she added.
These changes follow a comprehensive and wide-ranging review by the Civil Justice Council (CJC), published earlier this year. As a result, the government is set to introduce legislation to address this when parliamentary time allows.