The PACCAR ruling and litigation funding in the UK.

On 26 July 2023, the UK Supreme Court held that an agreement paying a litigation funder a percentage of the damages is a damages‑based agreement Source [1]. Such an agreement is enforceable only if it complies with section 58AA of the Courts and Legal Services Act 1990 Source [2]. On 17 December 2025, the British government announced legislation to mitigate its effects Source [3]. As of 21 October 2026, no statute has yet amended section 58AA Source [2].

The facts and the procedure.

On 19 July 2016, the European Commission found that five major European truck manufacturing groups, including DAF, had infringed competition law Source [1]. The Road Haulage Association and UK Trucks Claim then asked the Competition Appeal Tribunal, the UK’s specialist competition tribunal, for permission to act for the buyers of those trucks Source [1]. The first proposed opt‑in collective proceedings, the second opt‑out proceedings Source [1].

To obtain that permission, each applicant had to show that it could meet its own costs, and any adverse costs order if it lost Source [1]. In England, the loser pays rule makes the losing party bear a large share of the other side’s costs. Both applicants relied on litigation funding agreements (LFAs). Under each of them, the funder’s maximum remuneration was calculated as a percentage of the damages ultimately recovered Source [1].

PACCAR and two DAF companies argued that these LFAs were damages‑based agreements, unenforceable because they did not meet the statutory conditions Source [1]. The Competition Appeal Tribunal rejected that argument in 2019, and the Divisional Court did the same in 2021 Source [1]. The manufacturers then appealed directly to the Supreme Court, which heard the case on 16 February 2023 Source [1].

The question before the Supreme Court.

Under section 58AA, a damages‑based agreement is made between a provider of advocacy services, litigation services or claims management services and the recipient of those services Source [2]. The recipient pays the provider if it obtains a financial benefit, in an amount set by reference to that benefit Source [2]. The funders in question played no active part in the conduct of the litigation Source [1]. Everything therefore turned on the meaning of “claims management services”.

For those services, the statute refers to the Compensation Act 2006, and later to the Financial Services and Markets Act 2000 Source [1]. Their definition includes “the provision of financial services or assistance” Source [1]. The Court had to decide whether LFAs “pursuant to which the funder is entitled to recover a percentage of any damages recovered” fall within it Source [1].

The majority ruling and the dissent.

The Court ruled by four to one. Lord Sales gave the leading judgment, with which Lord Reed, Lord Leggatt and Lord Stephens agreed Source [1]. In his view, Parliament wanted in 2006 to be able to regulate a sector that was then poorly understood. He concluded that “there is good reason to think that Parliament used wide language in section 4 deliberately” Source [1]. Litigation funding therefore counts as “claims management services”, and the LFAs at issue are damages‑based agreements Source [1].

The Court had been told that, on that reading, “most third party litigation funding agreements would by virtue of that provision be unenforceable as the law currently stands” Source [1]. Lord Sales answered, expressing no view on the value of such funding, that it was no reason to depart from the conventional approach to statutory interpretation Source [1].

Lady Rose dissented. In her view, financial assistance falls within those services only when it comes from someone providing “claims management services” in the ordinary meaning of the words Source [1]. She would have dismissed the appeal Source [1].

The damages‑based agreements regime.

Section 58AA applies in England and Wales Source [2]. It provides that “a damages‑based agreement which does not satisfy those conditions is unenforceable” Source [2]. The agreement must be in writing and follow the rules laid down by the Lord Chancellor, the justice minister Source [2].

The Damages‑Based Agreements Regulations 2013, in force since 1 April 2013, set out those requirements Source [4]. The agreement must specify the claim it covers, the circumstances in which payment is due and the reason for its amount Source [4]. Outside personal injury and employment matters, the sum paid to the provider may not exceed 50% of the amounts ultimately recovered, VAT included Source [4]. That cap applies at first instance Source [4]. The LFAs in the trucks litigation did not meet these conditions Source [1].

Opt‑out collective proceedings before the Competition Appeal Tribunal follow a stricter rule: “A damages‑based agreement is unenforceable if it relates to opt‑out collective proceedings” Source [5]. No compliance route exists there, the Court noted Source [1].

What followed the ruling.

LFAs rewritten as multiples of the funder’s outlay.

After the ruling, class representatives amended their LFAs. In the cases the Court of Appeal decided on 4 July 2025, the funder now received a multiple of its outlay Source [7]. That return was still paid out of the proceeds and capped at their amount Source [7]. The Competition Appeal Tribunal had upheld these agreements, and the Court of Appeal dismissed the appeals brought by Sony, Visa, Mastercard and Apple Source [7].

On 6 November 2025, the Supreme Court refused two applications for permission to appeal, finding that “The application does not raise an arguable point of law” Source [9]. This recent case law remains liable to change, in particular through the announced legislation.

The Civil Justice Council heard the same account. “Respondents noted how PACCAR had resulted in the renegotiation of many percentage‑based LFAs as such multiplier‑based litigation agreements”, its report says Source [8]. Others submitted that the new agreements left funded parties with worse financial outcomes than percentage‑based ones Source [8].

The 2024 bill and the Civil Justice Council report.

The bill introduced on 19 March 2024 had two clauses Source [6]. It took LFAs out of the damages‑based agreements category Source [6]. That change was to apply to the past as well: “The amendments made by this section are treated as always having had effect” Source [6]. Parliament was dissolved before the bill passed, and the government elected afterwards chose to wait for the Civil Justice Council’s review Source [7].

That advisory body for civil justice had begun its work in April 2024, at the request of the then Lord Chancellor Source [8]. Its final report, published on 2 June 2025, makes 58 recommendations Source [8]. The first calls for legislation separating third‑party funding from lawyers’ contingency fees: “That legislation should reverse the effect of PACCAR” Source [8]. It adds: “The legislation should have prospective and retrospective effect” Source [8].

The report also proposes light‑touch statutory regulation, through regulations made by the Lord Chancellor Source [8]. It does not recommend, at this stage, giving that role to the Financial Conduct Authority, the UK financial markets regulator Source [8]. It calls for after‑the‑event insurance where funding goes to a non‑commercial party or to collective proceedings Source [8]. It also rejects any cap on funders’ returns Source [8].

The government’s position in October 2026.

On 17 December 2025, the minister Sarah Sackman announced the government’s intention to accept the Civil Justice Council’s two primary recommendations Source [3]. It will first legislate to clarify that LFAs are not damages‑based agreements, “with prospective effect” Source [3]. It will then introduce proportionate regulation Source [3]. That plan does not take up the retrospective effect that the 2024 bill and the Civil Justice Council provided for Source [3] Source [6] Source [8]. According to the Ministry of Justice press release, the ruling has led to a drop in collective action lawsuits, and legislation will come “when parliamentary time allows” Source [10].

The King’s Speech of 13 May 2026 and its briefing notes do not mention litigation funding Source [11]. On 15 September 2026, the government answered a written question: “We are pursuing the earliest legislative vehicle to deliver reforms that mitigate the effects of PACCAR” Source [12]. As of 21 October 2026, the date of our check, the reform has not been passed. According to legislation.gov.uk, section 58AA has not changed since 1 April 2019, and no amendment is pending Source [2].

The framework for an individual case in France.

The PACCAR ruling interprets a statute that applies in England and Wales Source [2]. In France, no statute prohibits or organises the funding contract for an individual case, as the framework in France explains. The Versailles Court of Appeal accepted it on 1 June 2006, as a contract of its own kind resting on freedom of contract Source [13]. The lawyer’s professional rules apply to it. Article 10 of the Act of 31 December 1971 thus bars a fee based solely on the outcome, the pactum de quota litis Source [14]. Third‑party funding does not change that rule.

Act no. 2025-391 of 30 April 2025 refers expressly to third‑party funding only for group actions Source [15]. It bars such funding from allowing the funder to influence the launch or conduct of the action against the interests of the people represented Source [15]. No French statute therefore subjects an individual case to a regime comparable to damages‑based agreements. Our European overview compares the rules of several countries, and our guide explains how funding works.

Hello Justice, the first French company dedicated to mid‑market litigation funding, funds individual cases. Each rests on a tripartite agreement signed by the client, their lawyer and Hello Justice. The PACCAR ruling shows that one court decision can change the form of the agreements across a whole market. The risks page describes this regulatory risk, in France as in the European Union.

Frequently asked questions.

What did the Supreme Court decide in PACCAR?

On 26 July 2023, it held that an agreement paying the funder a percentage of the damages is a damages‑based agreement Source [1]. Such an agreement is unenforceable unless it complies with section 58AA and the 2013 Regulations Source [2] Source [4]. Lady Rose dissented Source [1].

Is litigation funding still possible in England?

Yes. An agreement that complies with the damages‑based agreements regime remains enforceable, except in opt‑out collective proceedings Source [2] Source [5]. On 4 July 2025, the Court of Appeal held that LFAs rewritten as multiples of the funder’s outlay are not damages‑based agreements Source [7].

Has legislation reversed PACCAR?

Not as of 21 October 2026. The 2024 bill fell when Parliament was dissolved Source [7]. On 17 December 2025, the government announced prospective legislation, to be introduced “when parliamentary time allows” Source [3] Source [10]. On 15 September 2026, it was still seeking a bill to carry it Source [12].

Does the PACCAR ruling apply in France?

No. It interprets section 58AA, which applies in England and Wales Source [2]. In France, the funding contract for an individual case rests on freedom of contract and the lawyer’s professional rules Source [13] Source [14].