Litigation finance providers and senior disputes lawyers have welcomed a commitment by the UK government to change the law to protect the litigation finance sector following last year’s controversial Supreme Court PACCAR judgment.

July’s ruling that the regulations governing damages-based agreements (DBAs) apply to the litigation funding of class action claims in the Competition Appeal Tribunal is seen as a pivotal moment in the UK’s class action regime by limiting the extent to which funders can claim a portion of the damages in cases they support. 

Yesterday, the UK justice secretary, Alex Chalk, told the Financial Times that he planned “at the first legislative opportunity” to reverse “the damaging effects” of the judgment. 

His pledge came after former sub-postmaster Alan Bates, who heads the campaign group Justice for Sub-postmasters Alliance, highlighted the role litigation funding had played in allowing hundreds of sub-postmasters to take the Post Office to court in order to expose the Horizon IT scandal, one of the most significant miscarriages of justice in English legal history.

Welcoming the government’s commitment, Hausfeld partner John McElroy, a member of the London Solicitors Litigation Association’s main committee, said the availability of litigation funding for group actions had been “essential to enable members to pursue their claims without the damages recovered being outstripped by the costs of litigating and enabling the group to protect itself against the risk of adverse costs”.

Gary Barnett, executive director of the International Legal Finance Association (ILFA), said: “Litigation funders played a small – yet critical – role, giving the sub-postmasters the confidence and the financial firepower to take on the Post Office and secure justice.”

He added: “I hope common sense prevails and the government urgently fix the issue so individuals and small businesses like the sub-postmasters can continue to access justice in the future.”

Luke Harrison, co-founder of London disputes firm Keidan Harrison and co-chair of London International Disputes Week (LIDW), also welcomed Chalk’s commitment to ensure “litigation financing can continue to be offered flexibly, maximising its commercial availability to parties”.

“England is a key jurisdiction for capital and expertise in dispute finance, which plays a broader role in supporting parties to enforce their rights in London-based tribunals,” he added, acknowledging that funding would continue to spark debate.

“The disputes finance market in London has inspired much of the content at LIDW as it has continued to innovate and fill voids in access to justice. I am sure the legislation following today’s announcement will feature in the LIDW24 edition.”

In November, the government added an amendment to the Digital Markets, Competition and Consumers Bill in a bid to resolve the uncertainty surrounding litigation funding.

However specialist lawyers said the amendment as moved would not solve the problem, the Law Society Gazette reported.