Litigation funding after PACCAR: what the law is now and what the government has proposed

Correct as at 24 October 2026.

More than three years after the Supreme Court’s decision in R (PACCAR Inc and others) v Competition Appeal Tribunal [2023] UKSC 28, the ruling still governs third-party litigation funding in England and Wales. The government has said it will legislate to reverse its effect, but no bill to do so is before Parliament and section 58AA of the Courts and Legal Services Act 1990 has not been amended. What follows sets out the law as it currently applies, the Court of Appeal’s decision on revised funding agreements, and the reforms that have been announced but not enacted.

What PACCAR decided

The Supreme Court gave judgment on 26 July 2023. The question, as Lord Sales framed it at [3] of the judgment, was whether litigation funding agreements (LFAs) “pursuant to which the funder is entitled to recover a percentage of any damages recovered constitute ‘damages-based agreements’ (‘DBAs’)” within the statutory scheme. That turned on whether litigation funding fell within the definition of “claims management services”, which includes “the provision of financial services or assistance”.

The case arose from applications by the Road Haulage Association and UK Trucks Claim Limited to bring collective proceedings in the Competition Appeal Tribunal against DAF and other truck manufacturers. The Tribunal and then the Divisional Court held that the funding agreements were not DBAs. By a majority, the Supreme Court allowed the appeal. Lord Sales gave the leading judgment, with which Lord Reed, Lord Leggatt and Lord Stephens agreed; Lady Rose dissented, according to the court’s press summary.

The majority held that the words “claims management services”, read according to their natural meaning, were capable of covering the LFAs (at [50]), and that Parliament used wide language in section 4 of the Compensation Act 2006 deliberately (at [72]). The Damages-Based Agreements Regulations 2013 were not a permissible aid to interpreting the 2006 Act (at [47]). Lady Rose would have dismissed the appeal, holding that financial assistance is only included in the term if it is given by someone providing claims management services within the ordinary meaning of that term (at [254] to [255]).

The court recorded the practical consequence at [13]: it was told that if LFAs of this kind are DBAs, “the likely consequence in practice would be that most third party litigation funding agreements would by virtue of that provision be unenforceable as the law currently stands.”

The statutory framework that now applies

Under section 58AA of the Courts and Legal Services Act 1990, a DBA is an agreement between a person providing advocacy, litigation or claims management services and the recipient, under which the recipient pays if it obtains “a specified financial benefit” and “the amount of that payment is to be determined by reference to the amount of the financial benefit obtained” (section 58AA(3)(a)). A DBA that does not satisfy the conditions in section 58AA(4) is unenforceable (section 58AA(2)). Those conditions include that the agreement must be in writing and must comply with prescribed requirements.

The prescribed requirements are in the Damages-Based Agreements Regulations 2013, which came into force on 1 April 2013 (regulation 1(1)). For claims other than employment matters, regulation 4(3) provides that a DBA “must not provide for a payment above an amount which, including VAT, is equal to 50% of the sums ultimately recovered by the client”; in personal injury claims, regulation 4(2)(b) sets the figure at 25% of the general damages for pain, suffering and loss of amenity and damages for past pecuniary loss ultimately recovered. Under regulation 4(4), those caps apply only to claims or proceedings at first instance. In PACCAR, the conditions had not been complied with in relation to the LFAs in issue (at [13]).

In opt-out collective proceedings in the Competition Appeal Tribunal the position is stricter. Section 47C(8) of the Competition Act 1998 provides that “[a] damages-based agreement is unenforceable if it relates to opt-out collective proceedings”, and Lord Sales noted at [95] that there is “no scope” for such an agreement to be made enforceable by compliance with section 58AA. Section 58AA(11) confirms that subsection (1) is subject to section 47C(8).

The legislation.gov.uk record for section 58AA, checked on 24 October 2026, shows its last amendment taking effect on 1 April 2019 and states: “There are currently no known outstanding effects for the Courts and Legal Services Act 1990, Section 58AA.”

Funding agreements since PACCAR: the Court of Appeal on multiples

Funders and claimants responded by revising their agreements. In Sony Interactive Entertainment Europe Ltd v Alex Neill Class Representative Ltd [2025] EWCA Civ 841, handed down on 4 July 2025, the Court of Appeal heard linked appeals by Sony, Visa, Mastercard and Apple against Competition Appeal Tribunal rulings that the revised LFAs were not DBAs. As Sir Julian Flaux C explained at [3], the revised agreements provide that the funder’s fee is calculated “as a multiple or multiples of the funder’s outlay (or its committed outlay)”, is still paid out of the proceeds, and is capped at the level of the proceeds recovered.

The appellants accepted that a fee calculated as a multiple of outlay is not “determined by reference to the amount of the financial benefit obtained” (at [115]). Their argument was that a cap tied to the proceeds converted the agreement into a DBA. The court rejected it. At [118], it held that the statutory words “should be focused on the primary contractual entitlement of the funder, which in the present cases is to a multiple of its outlay”, and at [119] that a cap limited by reference to the proceeds “does not mean that it is determined or calculated by reference to the amount of those Proceeds.” All the appeals were dismissed (at [130]), with Green LJ and Birss LJ agreeing.

On 6 November 2025 the Supreme Court refused permission to appeal in two linked applications arising from the decision, brought by Visa and by Apple in the Gutmann claim, on the ground that each “does not raise an arguable point of law.”

What has been proposed, and is not yet law

The 2024 bill

The then Conservative government introduced the Litigation Funding Agreements (Enforceability) Bill [HL], which had its first reading in the House of Lords on 19 March 2024 and its committee stage on 29 April 2024. The Civil Justice Council records in its final report that “With the general election in July 2024, the Bill fell.”

The Civil Justice Council review

The Civil Justice Council (CJC) established its review of litigation funding in April 2024 at the request of the then Lord Chancellor, published an interim report on 31 October 2024 and published its final report on 2 June 2025. The report makes 58 recommendations. Recommendation 1 is that legislation should make clear that litigation funding is not a form of DBA, should “reverse the effect of PACCAR”, should make clear that funding is not a claims management service, and “should have prospective and retrospective effect.” Recommendation 8 proposes that the Lord Chancellor be given statutory power to regulate litigation funding through statutory instrument, and Recommendation 6 that funding of arbitration should not be subject to formal regulation.

The government’s response

In a written ministerial statement on 17 December 2025 (HCWS1192), Sarah Sackman, Minister for Courts and Legal Services, announced that the government would accept the CJC’s two primary recommendations: “Firstly, we will legislate to clarify that LFAs are not Damages Based Agreements, with prospective effect.” Secondly, it would “introduce proportionate regulation of LFAs.” She added: “We will introduce legislation when parliamentary time allows.” The Ministry of Justice’s press release said the government “will continue to consider the recommendations set out in the CJC review.”

The CJC had recommended prospective and retrospective effect; the government has stated prospective effect only. Asked in February 2026 whether the changes would apply retrospectively, the minister answered: “We intend to make this change with prospective effect” (written answer 110729, 10 February 2026).

Status as at 24 October 2026

In the most recent ministerial answer on the subject, given on 15 September 2026, the minister said: “We are pursuing the earliest legislative vehicle to deliver reforms that mitigate the effects of PACCAR” (written answer 901382). A search of the Parliament bills database on 24 October 2026 returned no bill on litigation funding other than the 2024 bill. The Ministry of Justice’s Courts and Tribunals Bill, which had its first reading in the House of Lords on 14 October 2026, contains no provision on litigation funding or section 58AA in its text as brought from the Commons.

Key milestones

Law now and proposals compared

• Law now: an LFA under which the funder’s return is calculated as a percentage of damages is a DBA (PACCAR, at [3] and [100]) and is unenforceable unless it meets section 58AA(4) and the 2013 Regulations; in opt-out collective proceedings it cannot be made enforceable (Competition Act 1998, section 47C(8)).
• Law now: on the Court of Appeal’s reasoning in [2025] EWCA Civ 841, an LFA whose return is a multiple of the funder’s outlay, capped by reference to the proceeds, is not a DBA.
• Proposed: legislation clarifying that LFAs are not DBAs, with prospective effect, and proportionate regulation of LFAs. No bill has been introduced.
• Recommended by the CJC, not in the government’s stated plan: retrospective effect for the reversal of PACCAR.