UK: Claimants bringing Collective Actions in the CAT suffer Setback at the Supreme Court

In a highly significant ruling, with implications for third-party funders and those bringing collective (class) actions in the Competition Appeals Tribunal (CAT), the Supreme Court has held (R (on the application of PACCAR Inc and others) (Appellants) v Competition Appeal Tribunal and others (Respondents) [2023] UKSC 28) that litigation funding agreements (LFAs), which entitle funders to a percentage of any awarded damages, are ‘damages-based agreements’ (DBAs) and as a result are unenforceable for funding collective proceedings in the CAT.

Many of the LFAs in existence do not comply with the DBA regime, and as a result will require renegotiation to bring them outside of the statutory definition of a DBA, if indeed this is even possible. As a result, there is a question regarding what happens to those actions currently in the CAT, and what is the future for collective damages actions more generally if funding cannot be obtained?

LFAs and DBAs

LFAs are agreements between litigation funders and claimants permitting the litigation funder to recover an amount payable from the proceeds recovered by the claimants if the claim is successful. Proponents of litigation funding argue that the industry has widened access to justice by providing a commercially viable business model to bring mass consumer class actions.

A DBA is a ‘no win no fee’ arrangement, entitling a client’s representative to a percentage of any awarded damages. The relevant statute defines DBAs as “an agreement between a person providing advocacy services, litigation services, or claims management services and the recipient of those services”. “Claims…