The UK Ministry of Justice says it intends to bring forward legislation to reverse the controversial PACCAR UK Supreme Court ruling on litigation funding, clarifying in statute that litigation funding agreements are not damages-based agreements.
The announcement mirrors a previous commitment by the former Conservative administration to reverse PACCAR, which was derailed by last year’s general election and subsequently postponed.
While no firm parliamentary timescale was provided by the government, the announcement was welcomed by consumer groups, claimant lawyers and litigation funders.
The UK government believes the 2023 Supreme Court ruling in PACCAR has harmed funding for meritorious claims and reduced the number of collective actions brought by claimants.
Sarah Sackman KC MP, minister for courts and legal services, said: “The Supreme Court ruling has left claimants in unacceptable limbo, denying them a clear route to justice. Without litigation funding, the sub-postmasters affected by the Horizon IT scandal would never have had their day in court.”
Sackman, a former solicitor-general, added: “These are David vs Goliath cases, and this government will ensure that ordinary people have the support they need to hold rich and powerful organisations to account. Justice should be available to everyone, not just those who can afford it.”
She added that the Supreme Court ruling had also threatened the UK’s status as a global leader in dispute resolution; a status her boss, Lord Chancellor David Lammy MP, is keen to uphold following the creation of a panel promoting English legal services. Sackman noted that the UK’s legal services industry was worth £42.6bn a year to the economy.
Sackman’s announcement follows a review by the Civil Justice Council (CJC), published earlier this year. Those findings are still being considered, though the reversal of PACCAR was a key recommendation.
Reaction from funders was swift. Neil Purslow, executive chair of the International Legal Finance Association, called the move “an important first step”, adding that it would “restore much-needed certainty for claimants and investors”.
Law Society of England and Wales president Mark Evans welcomed the clarity the UK government announcement would bring, but said more information on the timeline for introducing this legislation was needed.
Evans added: “There have often been unintended consequences in litigation funding, of trying to strike an appropriate balance between the interests of those involved. We will be monitoring this legislation closely on behalf of our members and consumers.”
From the claimant side, David Greene, co-president of CORLA (the Collective Redress Lawyers Association), said the announcement was good news for ordinary people seeking access to justice.
However, he added that regulating litigation funding agreements under the proposed legislation would likely introduce considerable delays, urging Sackman to introduce urgent legislation to reverse PACCAR and that “the thornier issue of what light touch regulation of litigation funding might look like” should be considered separately.
Jeremy Marshall, chief investment officer of Winward Litigation Finance, agreed, adding it would “certainly and regrettably add further delay to the enactment of legislation and greater uncertainty to the industry and its willingness to fund claims in the UK”.
Joseph Evans of Charles Russell Speechlys, said that while funders would welcome the “inevitable” news given funding’s substantial returns, he noted funders often received “the lion’s share of recoveries” in a case and were perhaps the ones who stood to profit most.
He added: “Although PACCAR threatened to derail the funding industry for a while, most of the uncertainty surrounding it disappeared following unsuccessful challenges to funding arrangements brought before the Competition Appeals Tribunal by Sony, Apple, Visa and Mastercard.”
However, he acknowledged “there does remain some uncertainty where the funder’s return is calculated on a percentage of the damages in the case, which is something the legislation will clear up”.
A recent report from Stephenson Harwood emphasised the benefits of PACCAR and class action reforms, notwithstanding extensive debate among claimant and defendant lawyers on the issue, which is set to continue in 2026.
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