On 19 March 2024, the Litigation Funding Agreements (Enforceability) Bill was published and had its first reading in the House of Lords.

The purpose of the Bill, which has only two clauses, is to reverse the effect of the Supreme Court's decision in the PACCAR case ([2023] UKSC 28), in which it was decided that litigation funding agreements which entitle the funder to recover a percentage of damages awarded is a Damages Based Agreement (“DBA”) and is accordingly unenforceable unless compliant with the DBA Regulations 2013.

The Bill does so by adding a carve out for litigating funding agreements following section 58AA(3) of the Courts and Legal Services Act 1990 as follows: “an agreement is not a damages-based agreement if or to the extent that it is a litigation funding agreement”. Clarity as to what constitutes a litigation funding agreement is then given in a new subsection 3A.

It is expressly stated (in new subsection 4) that the amendments made will be treated as always having had effect. 

The explanatory notes to the Bill acknowledge that, 

“Prior to the Supreme Court judgment in PACCAR, LFAs worked and enabled individuals, groups of individuals, and small and medium sized corporations to obtain funding to bring claims against well-resourced corporations and others which they could not otherwise afford.

…

The Supreme Court judgment rendered LFAs unenforceable. Uncertainty around litigation funding risks a detrimental impact on the attractiveness of the England and Wales jurisdiction as a global hub for commercial litigation and arbitration, and on access to justice more broadly."

In line with previous announcements, the Government has now taken action to remove the risk which arose in relation to litigation funding agreements following PACCAR, which is a welcome development for prospective claimants, practitioners and funders. 

It has separately been confirmed in Parliament that the Lord Chancellor has written to the Civil Justice Council, the body responsible for reviewing the civil justice system, inviting it to undertake a review of the funding sector. It was explained that, “This work will ensure that claimants can get the best deal and it will expressly consider the need for further regulation or safeguards. Its terms of reference will be announced in the coming days.”

Edit (June 2024): Following the announcement that a General Election will take place on 4 July 2024, a number of Bills did not proceed through Parliament to be passed as legislation before Parliament was prorogued on 24 May 2024. One of the Bills which did not make it into law by this date is the Litigation Funding Agreements (Enforceability) Bill. On the Parliament website, it is stated that "The 2023-24 session of Parliament has prorogued and this bill will make no further progress." 

It will now remain to be seen whether this Bill, in its current or an amended form, will be introduced again in the new parliamentary session.

LS Unlock

Lewis Silkin has committed to an initiative called LS Unlock. It is an alternative approach to fees which is designed to help individuals and businesses pursue or defend significant commercial claims by removing or reducing the cost risk of litigation.

LS Unlock comprises a free initial assessment of significant commercial disputes together with a menu of alternative fee arrangements which can reduce and, in certain cases, eliminate the upfront cost of pursuing or defending a claim.

Find out more here or contact Andrew Wanambwa for further information.