Litigation Funding Agreements (Enforceability) Bill will see “no further progress”

 

 

On 22 May Prime Minister Rishi Sunak announced that a general election would take place on 4 July 2024. As a result, much pending legislation did not survive the pre-election wash-up before parliament was prorogued on 24 May.

The Litigation Funding Agreements (Enforceability) Bill did not reach completion on 24 May and the parliament website states that: "The 2023-24 session of Parliament has prorogued and this bill will make no further progress."

If passed, the bill would have reversed the impact of the ruling in R (PACCAR Inc and others) v Competition Appeal Tribunal and others [2023] UKSC 28. By a 4 to 1 majority, the Supreme Court upheld an appeal by DAF challenging the litigation funding agreements (LFAs) in two separate follow-on collective claims against members of the EU trucks cartel.  The judgment renders those arrangements unenforceable until certain conditions are met.  The case concerns the definition of a damages-based agreement (DBA), derived from one legislative context - the Compensation Act 2006 (the CA 2006) - and its use in a different legislative context (section 58AA of the Courts and Legal Services Act 1990 (CLSA 1990)).  Section 58AA(1) and (2) CLSA 1990 provide that a DBA will be unenforceable unless certain conditions are met. The Damages Based Agreements Regulations 2013 (the DBA Regulations 2013) set out further requirements which must be satisfied if a DBA is to be enforceable. It is accepted that the LFAs in this appeal would not satisfy these conditions.  The relevant part of the definition of DBA in this appeal, pursuant to section 58AA(3), is whether the LFAs involve the provision of “claims management services".  The Court held that claims management services are capable of covering LFAs when “read according to their natural meaning”.  As a result, the claimants’ funding arrangements fell under the scope of the DBA Regulations 2013 since damages-based funders provide “client management services” and would be paid based on how much the tribunal awarded as damages.

The bill provided, with retrospective effect, that LFAs were not DBAs and thus they did not have to comply with the DBA Regulations 2013. This was achieved primarily by amending the definition of a DBA in section 58AA of the Courts and Legal Services Act 1990 to provide that an agreement, to the extent that it is an LFA, is not a DBA.

Some funding agreements needed to be revised to reflect the Supreme Court’s recent ruling but certain of the more prominent funders in the industry have reacted to say the judgment will not stem their appetite to fund a claim with merit.  With the demise of the Litigation Funding Agreements (Enforceability) Bill, appeals against certain CAT decisions finding that LFAs are not DBAs now take on a renewed significance. We will have to wait and see whether similar legislation is introduced in the next parliament.