Minister of State for Justice (): I would like to inform the
House that this government intends to take action to mitigate the
impact of the 2023 Supreme Court judgment in PACCAR and
implement proportionate regulation of third-party litigation
funding agreements (LFAs).
Third-party litigation funding plays a vital role in ensuring
access to justice. It enables people to bring complex claims
against better-resourced organisations, which they could not
otherwise afford. Sir Alan Bates, for instance, has spoken openly
about how without such funding he could not have brought his
claim against the Post Office. The Supreme Court judgment in
PACCAR introduced significant uncertainty about whether
LFAs remain valid and the regulatory regime that applies to them.
This uncertainty could be preventing significant numbers of
claimants from accessing justice.
LFAs are also used in high-value commercial cases where there is
a power imbalance between parties or where parties do not wish to
use limited capital resources on legal proceedings. Therefore,
this uncertainty also risks undermining the competitiveness of
England and Wales as a global hub for commercial litigation and
arbitration, both of which bring significant benefit to the UK
economy.
However, concerns have been raised about whether LFAs are always
fair and transparent for the claimants using them. This has led
to calls for greater regulation of the litigation funding market,
which currently operates under a system of voluntary
self-regulation. This is why, while it is crucial to act swiftly
regarding PACCAR, I have taken the opportunity to
consider litigation funding in the round.
I would like to thank the Civil Justice Council (CJC) for their
comprehensive and wide-ranging review of litigation funding
published earlier this year. Since its publication, my officials
and I have carefully considered its recommendations.
I am pleased to announce the government's intention to accept the
CJC's two primary recommendations. Firstly, we will legislate to
clarify that LFAs are not Damages Based Agreements, with
prospective effect. This will mitigate the effect of the
PACCAR judgment and improve access to justice by
reassuring funders that LFAs can be used to fund cases. Secondly,
we will introduce proportionate regulation of LFAs. This will
improve transparency and fairness for claimants. We will
introduce legislation when parliamentary time allows.
It is our priority that legislation removes the uncertainty
introduced by the PACCAR judgment and ensures that the
litigation funding sector works fairly and efficiently for all.
Once we have implemented these two changes, we will consider the
CJC's wider litigation funding recommendations in detail and
announce any further changes in due course.
