Case Summary - R V Competition Appeal Tribunal [2023] UKSC 28

Facts

The issue in this case was whether a form of arrangement for the financing of litigation by third-party funders was lawful and effective. Specifically, whether litigation funding agreements under which the funder is entitled to recover a percentage of any damages recovered constitutes damages-based agreements (DBAs) within the meaning of the relevant regulation. 

The issue was determined by whether litigation funding fell within an express definition of claims management services in the applicable legislation, which includes the provision of financial services or assistance. In this case, if the litigation funding agreements were deemed DBAs, they were unenforceable and unlawful as they did not comply with the formal requirements of s 58AA of the Courts and Legal Services Act 1990 and the Damages-Based Agreements Regulations 2013. 

Legal principles

Litigation funding agreements involve a third party financing all or part of the legal costs of an action in return for a share of any potential award of damages.

Under s 58AA, a DBA is an agreement between a person providing advocacy, litigation, or claims management services and the recipient. If the recipient obtains a specified financial benefit concerning the matter, they pay the person who provided those services. The amount is determined by reference to the financial benefit obtained.

The question was whether the principles that govern DBAs extended to not only solicitors, but also litigation funders and, specifically, whether claims management services included the provision of litigation funding.

Decision

The determination of the matter rested on the management of the claim, whether those providing financial assistance by litigation funding were involved in such, and whether the funder’s remuneration was calculated by reference to a share of the damages ultimately recovered. The Supreme Court held that when litigation funding agreements under which the funder’s remuneration is calculated by reference to a share of the damages recovered, the arrangement amounts to a DBA and, therefore, must satisfy the requirements of the Act and the Regulations to be enforceable. 

Significance

The Supreme Court’s decision concerned the matter before the Competition Appeal Tribunal in collective proceedings. However, the wider implications are that those providing funding will need to consider the arrangements under which funding is provided and whether they amount to DBAs. 

There are also implications for resolved cases as former clients may decide to challenge payments to the funder on the grounds that the original arrangement was unenforceable. 

Those providing funding, whether solicitors or third parties, will need to check that their arrangements comply with the necessary requirements to be enforceable.