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  1. News
  2. UK Supreme Court judgment opens up potential for a “radical review” of the entire litigation funding sector

UK Supreme Court judgment opens up potential for a “radical review” of the entire litigation funding sector

28 July 2023
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UK Supreme Court judgment requires litigation funding agreements to comply with additional conditions.

In a judgment released this week the Supreme Court has held that litigation funding agreements (“LFAs”), by which a third-party funder finances litigation costs in return for a percentage of any damages successfully recovered, fall within the definition of “damages-based agreements” (“DBAs”). Accordingly, LFAs are required to meet the special conditions set out by law which apply to DBAs.

Based on the Supreme Court’s judgment, any pre-existing LFAs which do not meet these conditions may now be unlawful and unenforceable.  The judgment has potential to impact significantly on the whole litigation funding sector because, as the Court was informed, most third-party litigation funding agreements currently in place do not, in practice, satisfy these conditions (the general assumption having been that LFAs are not DBAs). 

In a dissenting judgment Lady Rose acknowledged that the Supreme Court judgment would likely require “a radical review” of the entire litigation funding sector in the UK.  At the very least, for both pre-existing and future LFAs, action may be required to ensure appropriate compliance with the DBA conditions.

Next steps

We recommend actively considering whether you have any involvement with LFAs that could be impacted by the Supreme Court’s judgment.

If you require further information about the judgment or are concerned that it may have an impact for you please contact our Hogan Lovells team.

 

 

Authored by Ivan Shiu, Theresa Hudson, and Susanne Buergi. 

Contacts
Michael Roberts
Partner
London
Alex Sciannaca
Partner
London
Kieron O'Callaghan
Partner
London
Ivan Shiu
Partner
London
Nicholas Heaton
Partner
London
Keywords Litigation funding agreements, LFA, DBA, SC Trucks, UK Trucks Claim
Languages English
Topics White Collar Crime and Fraud, Commercial Arbitration, Investment Treaty Arbitration and Disputes, Public International Law Arbitration, Business Restructuring and Insolvency Litigation, Class Actions and Group Actions, Competition Litigation and Disputes, Corporate and Securities Litigation, Financial Services Litigation and Disputes, Global Asset Recovery and Enforcement, Real Estate Disputes, Risks, Disputes and Litigation, Technology Litigation and Disputes
Countries United Kingdom
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