Is it really a win?

The UK Supreme Court’s PACCAR judgment disrupted long-standing assumptions about how litigation funding works, and upended many funding agreements.¹ The Civil Justice Council has now made fifty-eight recommendations, including the reversal of PACCAR through legislation. Some commentators have cast this as a victory for access to justice and the continued viability of collective actions in the UK. But it is not so straightforward.

1. A 4-1 majority of the UK Supreme Court in R (on the application of PACCAR Inc and others) (Appellants v Competition Appeal Tribunal and others (Respondents) [2023] UKSC 28 (“PACCAR”) ruled that a form of arrangement for the financing of litigation by third party funders constituted a damages-based agreement (DBA) and, that arrangement not complying with the statutory requirements for a lawful DBA, it was ineffective and unenforceable.
2. The ruling invalidated a long-standing understanding in the litigation funding market that such arrangements were lawful. Indeed, the lower courts – the Competition Appeal Tribunal (the “Tribunal”) at first instance and the Court of Appeal – had agreed with the market. Three immediate consequences were: first, an attempt to restore certainty to litigation funding arrangements by renegotiating around the rule in PACCAR; secondly, an attempt to bring forward legislation to reverse the effect of PACCAR; and thirdly, the convening of the Civil Justice Council (the “CJC”) to consider litigation funding more broadly.
3. In four collective proceedings before the Tribunal the litigation funding arrangements were renegotiated so that – in broad terms – remuneration to the funder based on a percentage of damages awarded was replaced by a structure whereby the funder would recoup a multiple of its deployed capital. The Tribunal upheld all four of those arrangements; all four are now before the Court of Appeal.²
4. The attempt at immediate legislation failed. The Litigation Funding (Enforceability) bill 2024 was said to enjoy cross-party support in Parliament, but it did not get through the ‘wash-up’ when Parliament was dissolved for the July 2024 General Election. The incoming Government did not commit to restore the bill.
5. The then Lord Chancellor, Alex Chalk K.C., asked the CJC to advise on litigation funding and its regulation, after which the Government would consider what to do next. The CJC’s terms of reference were far broader than the questions raised by PACCAR; the term “DBA” does not appear in those terms of reference and no question is asked about whether a funder should be permitted a return based on percentages or multiples. Conceivably, the CJC might have avoided the question altogether; in the event, it had to deal with it.
6. The CJC chose to make the first of its fifty-eight recommendations:
   
   Recommendation 1: Legislation should be introduced to make clear that litigation funding is not a form of DBA and that it is a distinct form of funding from that provided by a party’s legal representative. That legislation should reverse the effect of PACCAR. It should also make clear that the provision of litigation funding is not a form of claims management service. The legislation should have prospective and retrospective effect.
   
7. If Parliament so legislates, certainty will be restored at least in this aspect of litigation funding. No matter how the Court of Appeal decides the four cases before it, there will be no need for further Supreme Court input.
8. Of course, the Government must decide which of the CJC’s recommendations to address, to what extent, and how.
9. While some commentators discuss the CJC’s recommendation that Parliament introduce ‘light-touch’ regulation to litigation funders, all have focused on the PACCAR recommendation. This is understandable, but misses a far deeper question of which the PACCAR debate is the most discussed aspect.
10. The deeper question is: should the UK permit group, representative and collective actions, or not? It is logical for those opposing these actions to attack litigation funding: without it, most of these actions would not start.
11. But the attack is wider and understandably so, for if PACCAR is reversed then, it is feared, there will be a claimant free-for-all.
12. In the view of their opponents, group, representative and collective actions are largely unmeritorious and vexatious. Litigation funders and lawyers are riddled with conflicts. Class representatives are unable to instruct them, control them or manage costs. Group actions, being largely unmeritorious, impose unnecessary costs on defendant firms, undermining their contribution to the economy. The deep pockets of litigation funders create an unlevel playing field in litigation against cost-conscious defendants. Claimant litigators have no incentive to manage costs, behave reasonably or weed out bad points.
13. The CJC has given short shrift to the “unmeritorious” argument³ and has recommended largely sensible regulatory measures to improve transparency and cost management while strengthening provisions against conflicts of interest.
14. One recommendation deserves close attention. Recommendation 21 states:
    
    Recommendation 21: The funder and the funded party’s lawyer should certify to the court, as part of the without notice approval process, that they did not approach either directly or indirectly the funded party to seek their agreement to pursue proceedings.
    
15. The explanatory wording at 8.13(d) states:
    
    Reforms to the certification process in the CAT to ensure greater scrutiny of the basis on which funded proceedings are brought. This should operate to ensure that the proceedings were originated by the claimant and not by their legal representative and/or the litigation funder.
    
16. This is reinforced by 8.22(d):
    
    The litigation funder and funded party’s legal representative should certify to the court, as part of the without-notice approval process, that they did not approach the funded party, either directly or indirectly, in respect of the claim. In other words, they must certify that the party sought funding and representation for their claim rather than the funder or legal representative seeking a party for litigation that they themselves sought to pursue.
    
17. This paragraph refers to a footnote 79:
    
    If a funder or lawyer wishes to pursue opt-out collective proceedings they ought only properly do so if they are themselves approved to be the class representative: see CAT, Guide to Proceedings (2015) at 73.
    
18. Charitably, we characterise “at 73” as a clerical error: the Guide to Proceedings at page 72 (which could equally have been stated to be paragraph 6.30, second indent, beginning on page 72) states:
    
    There is a range of pre-existing bodies which could potentially seek to carry out the role of class representative, such as consumers’ organisations, trade associations, law firms, third party funders or special purpose vehicles (“SPV”). While there is no blanket prohibition against certain types of organisation taking on the role of class representative, the Tribunal will closely consider the nature of that body, its motivations for being involved and, crucially, whether there is an actual or potential conflict between that body and the interests of the class members. The potential conflict between the interests of a law firm or third party funder and the interests of the class member may mean that such a body is unsuitable to act as a class representative. Where the proposed class representative is a SPV, the Tribunal will expect to be given details of the constitution and management 62 Section 47B(8)(a) of the 1998 Act. 63 Section 47B(8)(b) of the 1998 Act. 73 of the SPV and the reason why it was established. The Tribunal will consider each application in its individual circumstances and proposed class representatives should be prepared to explain why they are suitable to carry out that role. As in the case of class members seeking to act as the class representative, the Tribunal will also consider the body’s ability to manage the proceedings and instruct its lawyers.
    
19. The CJC’s proposition amounts to this: a firm of solicitors, which – per the CAT Guide may be unsuitable to act itself as a class representative – ought not to be allowed to solicit anyone else to be a class representative to bring litigation; and further, the solicitors must then certify (on pain of SRA investigation and sanction) that they have not directly or indirectly solicited that class representative.
    
20. This is problematic for so many reasons:
    • First, the CJC neither states the mischief which this suggested rule is intended to resolve, nor reasons from the alleged mischief to the proposed remedy;
    • Secondly, the proposed rule is discriminatory: in other areas of professional practice, solicitors are permitted to advertise their services and to suggest to clients or potential clients courses of action to advance those clients’ legal interests. Why, uniquely in competition collective litigation, should solicitors be prevented from doing this?
    • Thirdly, it may restrict the pool of firms able to act claimant-side, since only those firms that are large enough or sufficiently well-known will be able to benefit from ‘passive selling’ to potential clients. Firms of solicitors that currently enjoy defence-side group litigation practices may be consoled for the loss of much of this work by leveraging their network to obtain future claimant-side work.
    • Fourthly, to get around the application of the rule, one might expect that firms of economists or other professionals such as forensic accountants would take an enhanced role in originating cases – unbound by the same professional sanction that would apply to solicitors. This would defeat the ostensible objective of the rule: to ensure that clients and not service providers originate group actions. But it creates further blurred lines. What is the incentive on an economist to propose a case to a proposed class representative if in turn the class representative, who is expected to direct the case and manage the costs, must then tender the provision of economic advice and expert witness work? The alternative is a quid pro quo that the economist proposes the work in return for appointment, which would not be consistent with the principle of competitive tendering and expose the class representative to a conflict of interest.
    • Fifthly, the proposed rule would vitiate private enforcement of competition law. Without the work, variously, of economists, lawyers and funders, very few cases would be originated. This is of course exactly what defendants and their lawyers (ostensibly) want. Yet here the CJC contradicts itself: having dismissed (paragraphs 6.57-6.71) the argument that litigation funding engenders unmeritorious or vexatious litigation in the UK, it suggests a rule by which in practice most competition collective actions will be rendered impossible, which hardly furthers the CJC’s objective of developing “the civil justice system to make it more accessible, fair and efficient.”⁴ Nor does it allow private enforcement to complement public enforcement of competition law, which it needs to do since public enforcement (i) cannot deal with all cases; (ii) cannot award compensatory damages to claimants; and so (iii) cannot alone act as a complete deterrent to anti-competitive behaviour.
    • Sixthly, the proposed rule is vague and apt to lead to new disputes: when exactly has a firm of solicitors “indirectly” approached a funded party? Would an article published on a firm website indicating the nature of the possible claim suffice?⁵ Would a private briefing to a cohort of prior and potential class reps count as an indirect approach? In short, where does ‘indirect’ end?
    • Seventhly, the proposed rule would achieve by the back door what some defendants and their lawyers have so far failed to achieve by the front door, first by opposing the introduction through the Consumer Rights Act 2015 of collective actions in the CAT; then by taking every point in opposition to CPOs; thirdly, by seeking to constrain and limit the availability of litigation funding; and fourthly by promoting the canard that litigation funding engenders unmeritorious cases.
      
21. It is now for the Government to determine how far it agrees with the CJC’s fifty-eight recommendations and a response is expected soon. In determining what to do, the Government should recall the principles (access to justice, complementing public enforcement) that led to the creation of collective proceedings in the CAT and be mindful that in reversing PACCAR it should not then take away collective actions by other, unreasoned, means. What happens next will really determine whether this is a win for access to justice.
    
    12 June 2025