Ministers pledge legislation to reverse PACCAR ruling and stabilise litigation funding market
The government has promised new legislation to reverse the effects of the Supreme Court’s PACCAR ruling, which has left claimants and the litigation funding sector in what ministers describe as “unacceptable limbo”.
The Ministry of Justice said a bill will be brought forward to clarify that litigation funding agreements are not damages-based agreements. The move is intended to restore certainty after the 2023 Supreme Court judgment in PACCAR, which classified certain third-party funding arrangements as damages-based agreements and significantly disrupted the market.
Although no start date has been confirmed, the proposed legislation aims to introduce safeguards for collective action proceedings, particularly those brought against well-resourced defendants. The government said it also seeks to re-establish stability in the litigation funding sector, which it believes has been undermined by the ruling.
According to the Ministry of Justice, the PACCAR decision has made it harder for claimants to secure funding and has contributed to a decline in collective action claims. Ministers said this has restricted access to justice, particularly in cases where individuals or groups seek to challenge powerful organisations.
Sarah Sackman, minister for courts and legal services, said the ruling had left claimants without a clear path forward. “The Supreme Court ruling has left claimants in unacceptable limbo, denying them of a clear route to justice,” she said.
Sackman cited the Horizon IT scandal as a clear example of why litigation funding is necessary. She said that without third-party funding, the sub-postmasters affected by the scandal would not have been able to pursue their claims.
“These are David versus Goliath cases,” she said. “This government will ensure that ordinary people have the support they need to hold rich and powerful organisations to account. Justice should be available to everyone, not just those who can afford it.”
The government also linked the proposed reforms to its broader aim of maintaining the UK’s position as a global leader in dispute resolution. Legal services contribute £42.6bn a year to the UK economy, and ministers said uncertainty around funding arrangements risks damaging the sector’s international competitiveness.
Alongside reversing the PACCAR ruling, the government said it intends to legislate for a new framework to ensure litigation funding agreements are fair and transparent. These measures are designed to provide protection for claimants while offering greater certainty for funders and defendants.
The changes follow a review conducted by the Civil Justice Council, published earlier this year, which called for urgent reform in response to the PACCAR judgment. The government said it will continue to consider the council’s wider recommendations.
Legislation will be introduced “when parliamentary time allows”, the Ministry of Justice said.