In a recent ruling that has sent ripples across the UK’s litigation funding industry, the UK Supreme Court declared that a large number of litigation funding agreements are in fact damages-based agreements (DBAs), and hence, are subject to comply with the relevant regulations. This ruling has caused concern among funders as they scramble to reassess their existing funding agreements over fears that these agreements may be viewed as unenforceable in their current state, either partially or wholly.
Per the UK Supreme Court’s ruling, it appears that DBAs are not permissible for opt-out collective proceedings within the UK Competition Appeal Tribunal. This inevitably raises the specter of significant upheavals within the litigation funding industry, especially as many stakeholders brace themselves for the likely consequences of this decision.
This precedential ruling elucidates that litigation funding agreements, in order to be enforceable, must adhere to the strict requirements stipulated by the regulatory regime governing damages-based agreements. This has put a lot of pressure on litigation funders to swiftly revisit and, if necessary, revise their existing litigation funding agreements.
Apart from having a profound impact on the litigation financing industry, this landmark ruling has broader ramifications for the whole international arbitration community. It also underscores the need for diligent legal practitioners to stay abreast of the changing legal landscape to ensure compliance with the latest rules and regulations.