Joseph Evans, Ethan Khurwolah and Simon Heatley write for Thomson Reuters Practical Law on litigation funding and PACCAR

The Civil Justice Council (CJC) has released its final report on litigation funding, proposing significant reforms that could reshape the landscape for funders and practitioners. The report recommends reversing the Supreme Court's decision in PACCAR Inc v Competition Appeal Tribunal, which classified certain litigation funding agreements (LFAs) as damages-based agreements (DBAs), rendering many unenforceable. The CJC suggests a legislative fix to restore the pre-PACCAR position and introduce light-touch regulation for litigation funders. This would replace the current self-regulatory approach with oversight by the Lord Chancellor, ensuring capital adequacy and consumer protection.

The report also highlights the need for clarity in LFAs, distinguishing them from claims management services and recommending retrospective and prospective legislative changes. It proposes establishing a standing committee to collect data on funding models and suggests that law firms, funders, and HM Courts & Tribunals Service provide this information. While the report does not advocate immediate Financial Conduct Authority (FCA) involvement, it suggests reviewing this after five years.

Additionally, the report calls for procedural changes, such as mandatory costs budgeting for funded collective proceedings and revising CPR 19 to align with CAT rules. It emphasises the importance of codifying the approach to the Arkin cap, which limits a funder's liability for adverse costs. The CJC's recommendations aim to provide a regulatory baseline for funders and improve the operation of CFAs and DBAs, urging the government to act swiftly on these reforms.

In an article for Thomson Reuters Practical Law, Joseph Evans, Partner, Ethan Khurwolah, Paralegal, and Simon Heatley, Knowledge Lead discuss the implications of the CJC's report, highlighting the potential for sweeping changes in litigation funding and the importance of government action to implement these recommendations.

Read the full piece in Thomson Reuters Practical Law here.