The use of damages-based agreements (DBAs) for collective proceedings in the Competition Appeal Tribunal will be permitted under a change proposed last week to the Digital Markets, Competition, and Consumers Bill. The catch is that they will only be usable by litigation funders. This concept is a reaction to a ruling made by the Supreme Court in July, which declared that contracts granting funders a portion of the damages were unconstitutional.
Funders remained optimistic about the industry’s future, but they rushed to rework their existing agreements in order to keep them operational after the court’s ruling. But all that renegotiation won’t be necessary if this proposed change is approved. Percentage-based litigation funding agreements will remain valid.
Following the court’s ruling, some anticipated legal battles broke out. Bugs By Property attempted, but was unsuccessful, to use the ruling to terminate a contract it had with Therium Litigation Funding. In other instances, funders changed to agreements based on multiples after largely cordial discussions. Nonetheless, a lot of people in the market believe that clear laws are preferable, and this modification could provide that clarity
According to funders, the suggested change doesn’t really solve the confusion about LFAs and if they can be enforced. Oliver Hayes, who is a partner at Balance Legal, said, “It’s good that the government realizes something needs fixing after PACCAR. But, sadly, the way they’ve written the change doesn’t do enough. To clear things up, it should clearly say that the legal definition of a damages-based agreement (in the CLSA) doesn’t include a litigation funding agreement, which is what the legal world has always thought. This change to the proposal is needed to avoid wasting time and money in court for challenges to litigation funding deals, both in the CAT and other courts, after PACCAR.”
Funders claim that the proposed modification does not truly clear up any ambiguity surrounding LFAs and their enforceability. Partner Oliver Hayes at Balance Legal stated, “It’s good that the government recognizes that after PACCAR, something needs to be fixed. Unfortunately, though, the change’s wording falls short. To be clear, contrary to what the legal community has always believed, a litigation funding agreement is not included in the legal definition of a damages-based agreement (as stated in the CLSA). This proposal modification is necessary to prevent squandering time and resources in court when challenges to litigation funding agreements are brought before the CAT and other courts following PACCAR.
Tets Ishikawa, a litigation funder at Lionfish Finance, shares a similar perspective: “It’s a step in the right direction, but it kind of misses the mark. They’ve mainly focused on PACCAR and opt-out situations, saying DBAs aren’t allowed for opt-out competition claims unless it’s for litigation funding. They could have gone further by looking at the DBA Regulations 2013 and changing the definition of ‘claims management services’ to exclude litigation funding, which would have fixed the larger problem. Another option could have been dealing with Space of the Courts and Legal Services Act 1990, where claims management services are also covered. In short, it’s a positive move but somewhat limited. It seems like a quick fix for a specific situation that doesn’t address the bigger issue.”
The Association of Litigation Funders of England and Wales (ALF) and International Legal Finance Associations (ILFA) have released statements, with a consensus that while government action is supported, the changes need to be further developed.
Inaction on this could have a negative impact on the UK’s standing as a leading jurisdiction in legal affairs. In an effort to maintain the UK’s position as a leader in the enforcement of consumer and competition laws, we are attempting to engage with the government.
On November 20, the Bill is scheduled for its third reading, and those who are funding it are hoping for some modifications. The House of Lords is the next stop on the list.
Reference : https://www.google.com/amp/s/www.legalbusiness.co.uk/blogs/government-to-address-paccar-ruling-with-amendment-to-digital-markets-bill-but-litigation-funders-argue-it-isnt-enough/amp/
By – Alisha Roy…
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