Dispute resolution

Travers Smith recently acted for the successful appellants in R (on the application of PACCAR Inc. & Ors) v Competition Appeal Tribunal & Ors [2023] (PACCAR). The Supreme Court decision in PACCAR has significant implications for the third-party litigation funding market, determining that most current litigation funding agreements which provide for funders to receive a cut of damages awarded are likely to be unenforceable.

The appeal concerned a challenge to the litigation funding arrangements (LFAs) of two applicants for a collective proceedings order (CPO) in the Competition Appeal Tribunal (CAT). A CPO enables a proposed class representative to seek compensation on behalf of a group of persons seeking redress for competition law infringements.

The issue in this appeal was whether LFAs pursuant to which the funder is entitled to receive a percentage of any damages ultimately recovered constitute "damages-based agreements" (DBAs), within the relevant scheme of regulation. If DBAs do not comply with this regulatory regime, they are unenforceable.

The Supreme Court agreed with the appellants that the LFAs in this case were DBAs within the meaning of the applicable regulatory framework and, as such, were unenforceable as they failed to comply with regulatory requirements (which it was common ground between the parties they did not). The CPO applicants would therefore need to obtain alternative funding arrangements that comply with the regulations if their applications are to be proceed. As to its broader effect, most existing third-party LFAs currently provide for damages-based remuneration for funders and will likely now be unenforceable because of this decision, which is likely to have significant implications for the UK litigation funding industry. Read the judgment here.

Read our latest quarterly Dispute Resolution round-up for more about developments in the dispute resolution sphere. This edition considers two notable decisions in ESG-related litigation, a warning to corporates to ensure their internal investigations carefully should they wish to preserve privilege, and an interesting decision on crypto fraud. We also spotlight another noteworthy Supreme Court decision, the much-anticipated clarification of the so-called "Quincecare" duty upon banks to prevent certain types of fraud, as well has the continued attempts by claimant groups to use the representative action procedure under CPR 19.8 to get mass claims off the ground, with varying degrees of success.