Litigation funding after PACCAR: adaptation and growth

The litigation funding market in England has grown significantly over the past decade, enabling mass tort litigation and multi-claimant litigation, such as competition and Environmental, Social, and Governance (ESG) impact claims, on an unprecedented scale.

The July 2023 PACCAR decision by the UK Supreme Court, which deemed many litigation funding agreements unenforceable as damages-based agreements (DBAs), posed a significant challenge to the industry. However, subsequent court decisions (including Court of Appeal rulings in 2025 upholding revised LFAs based on multiples of committed capital) and government announcements indicate a clear path forward. Litigation funders have continued to structure or restructure arrangements to address PACCAR concerns, often using multiples-based returns or conditional clauses.

Despite the uncertainty, large-scale investments from funders to claimant firms highlight the continued expansion of litigation funding in England.

With the 2024 European Union Product Liability Directive requiring implementation into national laws by December 2026 (and applying to products placed on the market after December 9, 2026), Europe may also see further growth in its litigation funding market, potentially spurring mass tort filings through eased burdens on plaintiffs.

In the United States, complex, large-scale, and long-running mass actions dominate dockets across the country. Litigation funding arrangements often enable actions of this magnitude. These agreements are commonplace in the United States and a hallmark of U.S. mass litigation.

While historically less common in England, the emergence and subsequent exponential growth of the litigation funding industry over the last decade have facilitated group litigation on a new scale. That trend has only continued over the last two years—despite some recent uncertainty.

In the litigation funding market in England and Wales, assets have risen from £198 million in 2011/12 to £2.2 billion in 2022—a tenfold increase over a decade. The UK litigation funding market is now among the largest globally.

This growth has persisted despite the legal restrictions on the litigation funding regime, discussed below, and roadblocks to mechanisms for bringing claims, discussed in our prior publications. Claimant lawyers have sought alternative ways to structure their funding agreements and pursue their mass claims.

PACCAR Decision and Aftermath

In July 2023, in the PACCAR case, the UK Supreme Court held that litigation funding agreements (LFAs) that calculate funder return as a percentage of damages are likely unenforceable damages-based agreements (DBAs). In England, legislation restricts the use of DBAs, which are defined as agreements that provide advocacy services, litigation services, or claims management services where the funder’s payment is calculated by reference to the amount obtained by the claimant if the claimant is successful (i.e., as a portion of damages similar to a contingency fee agreement in the United States). The Supreme Court in PACCAR considered whether the LFAs at issue fell into the definition of DBAs and were therefore subject to such regulations, and found that they were. The decision was seen as a significant blow to the future of litigation funding, and it left many existing agreements at potential risk. In a dissenting opinion, Lady Rose explained that the decision was likely to “invalidate most if not all LFAs that ha[d] been agreed since litigation funding began.”

Subsequent court decisions, however, indicate a willingness to work around PACCAR with funder-friendly decisions, and funders have sought to restructure or recast funding agreements to attempt to avoid the concerns raised in PACCAR. Soon after PACCAR, the Competition Appeal Tribunal (“CAT”) upheld LFAs in the face of challenges, even where the funder’s return could be calculated with reference to damages. For example, in Alex Neill, the CAT found a LFA enforceable where it had been revised in light of PACCAR. Under the revised LFA, the funder’s return was calculated as the greater of: (1) a fixed fee calculated as a multiple of the capital committed to the litigation; or (2) a percentage of damages in the litigation. However, unlike the pre-PACCAR LFA, the percentage of damages calculation was made conditional on the mechanism being enforceable and permitted by applicable law.

Recognising the critical role that third-party funding plays in ensuring access to justice, in March 2024, Rishi Sunak’s Conservative Government introduced the Litigation Funding Agreements (Enforceability) Bill (the LFA Enforceability Bill) in the House of Lords. Its stated purpose was to restore the position to that which prevailed before the Supreme Court’s ruling in PACCAR such that LFAs were not DBAs and would be enforceable. The bill continued to progress through the House of Lords; however, it failed to pass before the July 2024 general election. Following the Civil Justice Council's June 2025 final report, the incoming Labour government announced on 17 December 2025 its intention to legislate to mitigate PACCAR's impact—clarifying that LFAs are not DBAs (with prospective effect) and introducing proportionate regulation of third-party LFAs—when parliamentary time permits. The government has accepted the CJC's two primary recommendations on these points, though broader reforms (including any retrospective elements) remain under consideration.

The CAT also recently certified a class action against Google over allegedly anticompetitive app store practices, despite objections from the defence about the LFA. The CAT allowed the case to proceed subject to certain revisions to the funding agreement that would be spelled out in the court’s forthcoming order.

Civil Justice Council Review of Litigation Funding

The Civil Justice Council (CJC)—an advisory body tasked with advising the Lord Chancellor, the Judiciary, and the Civil Procedure Rule Committee in England and Wales—is also weighing in on the litigation funding debate. On 2 June 2025, the CJC published its final report on litigation funding. The report makes a series of recommendations for the reform of litigation funding in England including recommending a “light-touch regulation of litigation funding”.

Further, the CJC recommend that “the effects of the Supreme Court’s decision be reversed by legislation which should be retrospective and prospective in effect” and which should “make clear that there is a categorical difference between contingency fee funding i.e. funding provided to a party to a dispute by their legal representatives (through a CFA or DBA) and litigation funding i.e. funding provided by an individual or a business who is not a party’s legal representative (litigation funders) for the purposes of dispute resolution”.

The Labour government has now committed to action on the core recommendations to reverse PACCAR prospectively and regulate proportionately, with legislation expected when parliamentary time allows (potentially in 2026), though the full scope and timing of implementation remain to be finalized.

The Future of Litigation Funding in England

Litigation funding is being used to finance group litigation on a scale not seen before in England, and litigation funders are more active than ever.

Litigation funders and claimants’ firms are also teaming up in novel ways. One newly formed company, for example, combines a law firm, litigation funder, insurance managing general agent, and a mass tort and group action claim acquisition company into one group. This first-of-its-kind company provides a one-stop shop for bringing U.S.-style mass tort claims in England. This structure signals the active role litigation funders in England intend to play when they invest in litigation, and would appear not to be permitted in the United States, where the general rule is that only licensed attorneys can own law firms.

Even outside of these novel corporate structures, litigation funders are actively involved in at least some of the cases they invest in. While they typically remain in the shadows (similar to their approach in U.S. litigation), they have publicly involved themselves in some recent cases. For example, in the Merricks v Mastercard litigation, the funder Innsworth Capital intervened to object to the proposed Merricks settlement, contending the £200 million settlement was far below the claim’s £10 billion valuation, and arguing, among other things, that Innsworth did not consent to the settlement amount. Despite this objection, the CAT approved the settlement in February 2025 (with detailed reasoning in May 2025). Innsworth has since pursued judicial review of aspects of the distribution mechanism (not the settlement amount itself), with permission potentially to be considered at an oral hearing in early 2026. Defendants may see this as a sign that they have more leverage to negotiate directly with claimants than their funders.

Litigation Funding Horizons in Europe

England is not the only legal market that can expect to see growth in litigation funding. The new EU Product Liability Directive came into effect in 2024 and must be implemented into the national laws of EU Member States by December 2026. The Directive eases the burden on product liability plaintiffs in numerous ways, including a rebuttable presumption of defectiveness or causation in certain circumstances, which may encourage mass tort filings in the European Union.

Litigation funding practices have also been an area of interest in the European Union. For example, in 2024, the European Law Institute (ELI) issued a report on litigation funding best practices. As the ELI observed in its report, litigation funding is expected to play a growing role in the EU.

Conclusion

The litigation funding landscape in England continues to evolve rapidly, driven by significant market growth and ongoing legal developments. Despite potential roadblocks such as the PACCAR decision, the industry has shown persistence through judicial flexibility, funder adaptations, and now government commitment to legislative reform. An active litigation funding market in England appears to be the new normal and may further fuel the growth of England’s burgeoning multi-claimant regime.

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