Litigation funding
The PACCAR Decision and Litigation Funding
What the Supreme Court decided in PACCAR, why it mattered to funders, and what it means for funding and insurance today.
A teaching shape, not pricing. Funding pays for the case and takes a share of the upside; insurance caps the downside for a premium. Many matters use both.
What did the PACCAR decision decide?
In R (PACCAR Inc) v Competition Appeal Tribunal [2023] UKSC 28, the UK Supreme Court held that litigation funding agreements under which the funder's return is calculated as a percentage of damages are damages-based agreements. Such agreements are unenforceable unless they comply with the DBA rules, and cannot be used at all in opt-out collective proceedings in the Competition Appeal Tribunal.
- Reading
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- Sections
- 4
- Questions
- 5
On this page · 6 sections2 min read
Key points
4 to know
- Decided by the UK Supreme Court in July 2023.
- Percentage-of-damages funding agreements were treated as DBAs.
- Many funders moved to returns based on a multiple of capital.
- Reversal by legislation has been proposed; check the current position.
Why it mattered
Many funding agreements had been drafted on a percentage-of-damages basis without complying with the DBA rules, calling their enforceability into question and prompting renegotiation across the market.
How the market responded
Funders commonly restructured their returns as a multiple of the capital deployed rather than a share of damages, and some agreements were amended to include both with fallbacks.
Reform
Legislation to reverse the effect of PACCAR has been proposed, and the Civil Justice Council has reviewed litigation funding and recommended reform.
The position may have changed since this page was written, so take advice on the current law.
What it means for insurance
PACCAR concerned funding agreements, not insurance policies.
But because funders often require ATE and may protect capital with insurance, changes to funding terms can affect how insurance is structured alongside them.
Frequently asked
5 questions · answered in plain terms
What is the PACCAR judgment?
A 2023 UK Supreme Court decision holding that funding agreements giving the funder a percentage of damages are damages-based agreements, subject to the DBA rules.
Did PACCAR make litigation funding illegal?
No. It affected how funders' returns could be calculated. Funding continued, commonly with returns based on a multiple of capital.
Has PACCAR been reversed?
Legislative reversal has been proposed and recommended; check the current position, as it may have changed since this page was written.
Does PACCAR affect ATE insurance?
Not directly: it concerns funding agreements. It can affect how insurance is arranged alongside funding.
What is a damages-based agreement?
An arrangement where a representative's payment is a share of the damages recovered. In England and Wales DBAs are regulated and capped.
General information only. This page is not legal, financial, investment or insurance advice. Any insurance is subject to underwriting and to the terms of the policy wording issued.
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