R (on the Application of PACCAR Inc. and Others) v. Competition Appeal Tribunal and Others, [2023] UKSC 28.

Abstract

In the landmark ruling of PACCAR Inc. and Others v. Competition Appeal Tribunal and Others (PACCAR), the United Kingdom Supreme Court (UKSC) has introduced a significant shift in the regulatory landscape governing third-party funding (TPF) in all proceedings. The UKSC addressed the question whether litigation funding agreements (LFAs), through which funders receive a percentage of the damages recovered, constitute damages-based agreements (DBAs). The UKSC considered this question by reference to an express definition of DBAs under Section 58AA(3) of the Courts and Legal Services Act 1990 (CLSA 1990) and Section 419A of the Financial Services and Markets Act 2000 (FSMA). This determination is significant because it changes the classification of LFAs to DBAs, subjecting the non-regulated LFAs to DBA regulations. The UKSC examined whether LFAs encompass “claims management services,” including the “provision of financial services or assistance.” If these LFAs qualify as DBAs, they are unenforceable due to the statutory prohibition of DBAs for opt-out collective proceedings. The UKSC held that the LFAs in question are DBAs, rendering them unenforceable. This decision would invalidate many LFAs that were presumed not to qualify as DBAs when adopted; it has the potential to impact funding agreements for international arbitration cases and cases before the courts of other jurisdictions where English law is applicable.