Reversing Paccar: A Turning Point for UK Litigation Funding

The Civil Justice Council has issued a major report recommending the reversal of the Supreme Court’s 2023 Paccar decision, which caused severe disruption to the litigation funding market in the UK.

The CJC is an independent advisory body sponsored by the Ministry of Justice. It reviews and recommends reforms to improve the civil justice system, with a focus on access to justice and procedural fairness.

The Paccar Decision: A Barrier to Funding

In Paccar, the Court held that litigation funding agreements which entitled funders to a percentage of damages were damages-based agreements (DBAs) and therefore unenforceable unless they complied with strict statutory requirements. As most funding agreements had not been structured with these rules in mind, the judgment cast doubt over the enforceability of many existing arrangements, causing widespread uncertainty for claimants, funders, and legal practitioners.

Full judgment in Paccar: https://www.supremecourt.uk/cases/uksc-2021-0078

Restoring Confidence in Legal Finance?

The CJC’s intervention represents a timely and necessary move to restore confidence in third-party funding. For many businesses, especially those with constrained resources, this isn’t just about legal technicalities - it’s about preserving a fair chance to pursue legitimate claims and protect their interests.

The CJC’s report calls for a statutory reversal of the Paccar decision that would apply both retrospectively and prospectively. This would ensure that agreements made in good faith prior to the ruling are not rendered void, while also clarifying the law for future cases.

Proportionate Regulation Without Overreach

In addition to the reversal, the Council recommends implementing a “light-touch” regulatory framework for commercial litigation funders. It distinguishes between funders supporting sophisticated commercial clients and those involved in group or consumer actions, where additional transparency and oversight would be appropriate.

Notably, the CJC rejected the idea of bringing funders under Financial Conduct Authority (FCA) regulation, arguing that the existing framework can be adapted without overburdening the market.

Practical Impact

If adopted, these reforms would have far-reaching consequences:

• For businesses: If implemented, the reforms would reopen access to third-party funding, enabling claimants, including SMEs and mid-sized companies, to pursue meritorious claims that may have been financially out of reach following Paccar.

• For legal professionals: A clearer funding landscape may enable a return to innovative risk-sharing models, such as hybrid DBAs and portfolio funding.

• For funders: Legal certainty would support more competitive terms and confident capital deployment.

• For defendants in class actions: A more regulated environment for group litigation funding will increase scrutiny, particularly around disclosure and oversight.

  
  

These developments signal a welcome return to stability in the litigation funding sector. For businesses evaluating litigation risk or funding options, it is critical to reassess strategy in light of upcoming legislative changes.

The full CJC report:  https://www.judiciary.uk/wp-content/uploads/2025/06/CJC-Review-of-Litigation-Funding-Final-Report.pdf

Please get in touch to understand how these developments could affect your dispute strategy or funding arrangements.