In the most important funding decision in 20 years, the UK Supreme Court has declared in R. (PACCAR Inc. and others) v Competition Appeal Tribunal and others [2023] UKSC 28, [2023] 1 W.L.R. 2594 that, as a matter of statutory interpretation, a third-party funder’s litigation funding agreement (LFA) is a damages-based agreement (DBA) because third-party funders are offering “claims management services”. This decision, which overturned both the earlier Divisional Court and the Competition Appeal Tribunal decisions, and long-held industry and judicial understanding, has had an immediate impact upon UK litigation. Many LFAs will require immediate re-negotiation, given their non-compliance with the DBA legislation; but for some, the ramifications are much more serious. This article traces the legislation, soft law and law reform activity which preceded this momentous event; it suggests that a key principle of statutory interpretation which governed the outcome might arguably be re-evaluated in future case law; it discusses the possibility of legislative reversal; and it predicts the ramifications of the PACCAR decision upon (especially consumer) litigation unless reversed.

Third Party Funding is governed by a unique and unparalleled legal framework in English law. That framework consists of: the recent 2014 Code of Conduct for Litigation Funders, its supervision by the Association of Litigation Funders, and sporadic judicial oversight of Litigation Funding Agreements – and with some unenacted legislation in the background for good measure. The purpose of this article is to analyse and critique this unique regulatory regime in several key respects. These include: the capital adequacy required of Funders; the key anti-champerty factors either judicially stipulated or contained within the 2014 Code; the efficacy and fairness of the so-called “Arkin cap”; the grounds upon which a Funder may legitimately withdraw funding; and the impact of recent contingency fee reforms. Overall, Third Party Funding represents an evolving and controversial landscape, both legally and politically.