The UK’s Ministry of Justice has introduced legislation in Parliament to ensure the enforceability of litigation funding agreements.

The Litigation Funding Agreements (Enforceability) Bill was started in the House of Lords on Tuesday (19 March), two weeks after the Lord Chancellor, Alex Chalk, outlined the government’s plans to reverse the effect of last July’s high-profile Supreme Court PACCAR decision.

The ruling held that litigation funding agreements that allow the funder to receive a share of damages were Damages-Based Agreements, rendering many such agreements unenforceable. It was met with dismay by funders and claimant lawyers and garnered national attention thanks to funding’s role supporting the group claim against the Post Office which in 2019 exposed the Horizon IT scandal.

BCLP partner Andrew Leitch, who specialises in competition litigation, said the government had acted swiftly to reverse the UK Supreme Court’s judgment wholesale noting that its retrospective effect would mean that many defendant-led legal challenges faced by cases in the courts would disappear.  

He concluded: “It is, therefore, likely that this legislation will end the recent period of uncertainty over litigation funding following the PACCAR ruling, providing clarity that class representatives and litigation funders will undoubtedly welcome.”

Susan Dunn, chair of the Association of Litigation Funders, said: “We look forward to the bill making its way through the parliamentary process and being in place by the summer recess, and we 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.”

Julian Chamberlayne, a risk and funding partner at Stewarts, said the decision was a testament to the litigation funding industry’s lobbying for swift action, which, he added, “should shortly confine the controversial PACCAR decision of the Supreme Court to the history books”.