Government to legislate for enforceability of litigation funding agreements based on a share of damages

As is widely reported this morning, the Government has announced plans to introduce legislation to reverse the effect of the Supreme Court's decision in Paccar in July 2023, which established that litigation funding agreements based on a share of damages are Damages-Based Agreements (or DBAs) and are therefore unenforceable unless they comply with the restrictive regulatory regime for such agreements (see our blog post here). 

The new legislation is intended to clarify that litigation funding agreements are not DBAs and introduce a new framework to ensure that litigation funding agreements are fair and transparent. The timing is unclear, as the Government has merely said legislation will be introduced when parliamentary time allows. 

The previous Government had introduced legislation to Parliament that would have reversed the effect of Paccar, but the relevant Bill fell in the pre-election wash-up (see our blog post here). The Labour Government then indicated that it would wait until after the Civil Justice Council (CJC) had released its report and recommendations on the litigation funding sector before making any policy decisions. 

The CJC's report was published in June 2025. It recommended the immediate reversal of Paccar with retrospective effect, as well as a new system of "light touch" regulation for litigation funding and various other measures (see our blog post here).

It is not yet clear whether the Government's planned legislation will have retrospective effect. However, the minister for courts and legal services who made today's announcement, Sarah Sackman, indicated in a Westminster debate in October that it was "highly unlikely" that any legislation would be retrospective.

We understand that the government is still considering the CJC's broader recommendations.

NOTE: The government's written statement confirms that the legislation to reverse the effect of Paccar will have prospective effect.