King's Speech prolongs uncertainty with silence on reform of litigation funding in England and Wales

In July 2023, the Supreme Court's decision in R (on the application of PACCAR Inc and others) v Competition Appeal Tribunal sent shockwaves through the litigation funding industry. The Supreme Court held that litigation funding agreements (LFAs) in which a funder's return is calculated as a percentage of the damages recovered by the claimant are "damages-based agreements" (DBAs) within the meaning of section 58AA of the Courts and Legal Services Act 1990, meaning that they must comply with the Damages-Based Agreements Regulations 2013 in order to be enforceable. A large number of existing LFAs as a result became vulnerable to enforceability challenges, particularly those deployed in competition claims where DBAs are altogether prohibited.

In June 2025, the Civil Justice Council (CJC) recommended that Parliament reverse PACCAR as soon as possible. Six months later, the Ministry of Justice confirmed that the government intended to introduce legislation clarifying that LFAs fall outside the DBA regime, while declining to commit to any timetable. 

The ministry indicated that legislation covering both a reversal of PACCAR and the introduction of proportionate regulation of funding agreements would be introduced "when parliamentary time allows". With no public consultation or further consideration having taken place on the CJC's recommendations on regulating funders and funding agreements, the prospect of legislation seems a long way off.

Many in the funding industry hoped that the 2026 King's Speech would include a litigation funding bill at least to resolve the PACCAR position. King Charles III delivered the speech on 13 May setting out a wide-ranging legislative programme, which, notably, included a Competition Reform Bill. However, the bill contains no reference to litigation funding and is primarily aimed at implementing changes following the government's "Refining our Competition Regime" consultation. Litigation funding was absent from the programme entirely. 

Where things stand

There are a range practical implications of this impasse. PACCAR remains in force. Funders, and the litigants and lawyers they support, must continue to review both existing and proposed funding agreements carefully for enforceability risk and amendment mechanics. Where relevant, they will also need to consider the requirement for court or tribunal approval. 

Many funders have adapted to the challenges posed by PACCAR by structuring returns as a multiple of capital deployed or committed, rather than as a percentage of damages. Multiple-based structures are considered less likely to engage the DBA regime.

The multiple-based structure has survived legal challenges following PACCAR, but is not without practical problems. The economics of a multiple return may work well in high-value litigation, but may render many lower and mid-value cases commercially unattractive to funders. For claimants, they may also be unviable: a funder's multiple return is more likely to disproportionately erode the damages otherwise due to them. 

The moral case for funding such cases may often be strong but workable commercial solutions are difficult to structure. Litigation costs are high in England and Wales and, if a claim fails, generally a funder loses its entire case investment. A litigation funder therefore demands substantial returns for each successful case in its portfolio in order to mitigate the significant costs risk of failed cases. 

Collective actions

The consequences of PACCAR are most acute in collective actions. Funders' fees are subject to heightened scrutiny at the collective proceedings order stage in the Competition Appeal Tribunal (CAT), with the tribunal and commentators questioning whether a multiple return adequately serves class members' interests. This may consume a disproportionate share of the class's recovery, A percentage-based return would, by its nature, be more likely to be proportionate to what the class recovers; however, this option is unavailable owing to PACCAR. 

The Law Commission is currently exploring the possibility of extending the opt-out consumer class action regime outside competition law. If collective redress mechanisms are to be expanded beyond the competition context, then suitable and flexible funding structures need to be available to support them.

Osborne Clarke comment

Although the King's Speech was silent on litigation funding, reform is unlikely to be off the agenda, though it does extend the period of uncertainty. Prolonged inaction risks a gradual withdrawal of funding capacity from the English and Welsh market, reducing funding available for claimants.

Regardless of whether PACCAR is reversed, funders, funded parties, legal representatives and defendants are well advised to keep a close watch on judicial developments concerning restructured litigation funding agreements, settlement approval processes before the CAT, and active challenges to funding arrangements in ongoing cases.