UK Government to legislate on litigation funding to mitigate the effects of the 2023 Supreme Court decision in PACCAR

On 17 December 2025, the UK Government announced in Parliament that it will be taking legislative action to mitigate the negative impact of the Supreme Court’s decision in PACCAR (R (on the application of PACCAR Inc and others) (Appellants) v Competition Appeal Tribunal and others (Respondents) [2023] UKSC 28) and to implement proportionate regulation of third-party litigation funding agreements. The Government’s rationale for legislating on this issue is that it will ensure fair access to justice and the competitiveness of the UK as a global litigation and arbitration hub.

The Supreme Court in the PACCAR case from July 2023 decided that litigation funding agreements which calculate funder return as a percentage of damages are likely to be unenforceable damages based agreements (“DBAs”), unless they comply with the Damages Based Agreement Regulations 2013 (see our previous OnPoint Funders Keepers: Growth in Litigation Funding in England Continues Despite Legal Challenges). Although there was a clear expectation that the Government would legislate in this area for access to justice reasons, the PACCAR decision caused uncertainty in the litigation funding market.

Accordingly, the Government’s announcement is not surprising, particularly in light of the recommendations made by the Civil Justice Council (the “CJC”) in their detailed Review of Litigation Funding published in June 2025.

The Government broadly accepted the two primary recommendations made by the CJC, namely:

1. to introduce legislation clarifying that litigation funding agreements are not DBAs with prospective effect (i.e., overriding the PACCAR judgment with respect to any future litigation funding agreements); and
2. to introduce proportionate regulation of litigation funding agreements.

The timing of any legislative changes and the nature and scope of the proportionate regulation are yet unknown. Nonetheless, this development will ensure the continued growth of class actions in England and Wales.

The CJC made 57 recommendations in total, many of which would benefit the litigation market as a whole. For example, the CJC recommended establishing alternative procedures for low value or small collective claims to safeguard businesses from a rise in funded actions.  The Government indicated that it will be looking at all other recommendations in due course.  

This is a hot topic which Dechert has been closely following along with other important issues in the mass torts/class actions world, please see our earlier OnPoints:

• Funders Keepers: Growth in Litigation Funding in England Continues Despite Legal Challenges, 16 May 2025
• A Class Act: Is England a New Battleground in High-Value Multi-Claimant Actions?, 20 February 2025
• Recent English Law Developments Invite Mass Tort and Other Multi-Claimant Litigation, 13 February 2025
• Representative Claims: A Game of Two Halves?, 11 February 2025