The UK government has introduced a litigation funding bill this week, that if passed, will reverse a ruling by the Supreme Court last year.
Last July, the Supreme Court in the so-called PACCAR case handed down a decision that left the litigation funding sector in a state of confusion.
The highest court in the UK ruled that the litigation funds backing the case against the truck companies did not have the correct financial arrangements in place to be able to properly support the court actions. The decision left the litigation funding sector in limbo, raising concerns about funding for ongoing and future litigation.
Earlier this year, when the Post Office scandal was in the spotlight, Alan Bates, the former sub-postmaster who led Justice for Sub-postmasters Alliance, was very outspoken on the topic of litigation funding. He pointed out that this method of financing court cases was crucial in his fight against the Post Office.
The Justice Secretary Alex Chalk MP vowed afterwards that focus would be put on the funding issue, to reverse “the damaging effects” of the Supreme Court ruling “at the first legislative opportunity”.
This week the Ministry of Justice (MoJ) introduced the Bill into Parliament. As highlighted by Julian Chamberlayne, partner at Stewarts, “it is a testament to the lobbying power of the litigation funding community that they have managed to rally the government into such swift action.”
As stated in the Bill’s facts sheet, it will restore the pre-judgement funding regime, as the MoJ seeks for the new legislation to “enhance the attractiveness of the thriving UK legal sector”.
Chamberlayne explains that the Bill “clarifies that litigation funding agreements are not damages based agreements (DBA), and hence not subject to the DBA Regulations.”
Partner Andrew Leitch at BCLP explained that if this Bill is passed, “this legislation will take litigation funding agreements outside the definition of a DBA in all forms of litigation.”
He stated that this “is wider than the now-removed amendment to the Digital Markets, Competition and Consumers Bill, which would have limited the change to opt-out collective actions in the Competition Appeal Tribunal.”
“If passed in its current form, the Bill will effectively dispose of the various cases set to be heard by the Court of Appeal on the enforceability of various funding agreements in opt-out collective proceedings before the CAT,” Leitch added.
Prateek Swaika, partner at Boies Schiller Flexner pointed out that this Bill “is a step in the right direction”, as he explained “it allows both the hundreds of claimants and litigation funders who, since PACCAR, had avoided entering into English law funding agreements or were in the process of revising existing arrangements to that effect, to consider returning to England for litigation funding and to litigate the underlying disputes.”
The MoJ noted in its fact sheet that its not certain of the size of the litigation funding market in the UK due to confidentiality, however, it was stated that “industry sources estimate the size for 2023 to be between £1.5bn to £4.5bn”.
The Bill went through its first reading at the House of Lords on Tuesday, and it set for its second reading on 15 April.
Susan Dunn, chair of the Association of Litigation Funders added: “We look forward to the Bill making its way through the Parliamentary process and being in place by the Summer recess.”
She added that that association “will work with the Government to ensure the wording of the Bill achieves the desired result of removing all remaining uncertainty about the use of funding for good claims.”