Third-party Litigation Funding ' UK Decision Illustrates Complexities Of Regulation

Published date20 September 2023
Subject MatterAntitrust/Competition Law, Litigation, Mediation & Arbitration, Antitrust, EU Competition , Trials & Appeals & Compensation
Law FirmMatheson
AuthorMs Julie Murphy-O'Connor, Michael Byrne, Tina Turner and Róisín Peart

Supreme Court's decision in R (on the application of PACCAR Inc and others) v Competition Appeal Tribunal and others [2023] UKSC 28

The UK Supreme Court recently handed down an important judgment concerning the statutory interpretation of the legislative framework regulating litigation funding agreements1. The litigation funding agreements ("LFAs") at issue in the case were entered into to support opt-out collective litigation proceedings before the Competition Appeal Tribunal and the judgment stands to affect all LFAs which entitle funders to payments which are based on the level of damages recovered in the litigation.

The decision has been the subject of significant press attention and legal commentary. Its implications will be particularly acute, not only for competition litigation in England, but for collective proceedings more generally, given the surge in litigation funding in recent years to facilitate, in particular, multi-claimant actions in relation to ESG, data protection, and consumer-based claims.

The PACCAR decision is illustrative of the complexities faced by legislators in Ireland, as they consider potentially regulating the introduction of third-party funding in this jurisdiction.

At present, the funding of litigation by third-parties remains largely prohibited in Ireland. However, the Law Reform Commission recently published a consultation paper (the "LRC Consultation") seeking views on how such funding might not only be legalised in Ireland but also the manner in which it might be regulated. The LRC Consultation is due to run until November 2023. See our previous updates here and here for further information.

UK Supreme Court decision

The question addressed by the UK Supreme Court was whether certain LFAs which entitled the funder to recover a percentage of any damages awarded constituted "damages-based agreements" ("DBAs") within the meaning of the Courts and Legal Services Act 1990.

Sir Rupert Jackson, shortly after his appointment as a judge of the Court of Appeal in England and Wales in 2008, was tasked with reviewing civil litigation costs. Interestingly, he endorsed third-party funding in his reports and recommended self-regulation, seemingly without considering an LFA to be a DBA. The litigation funding industry in the UK has subsequently been allowed to grow with few constraints from legislators.

The issue in the PACCAR case arose in the context of applications for collective proceedings orders ("CPOs") by UK Trucks Claim Ltd...

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