The UK Court of Appeal issued a ruling on July 16, 2025, providing clarity on the compliance of certain litigation funding arrangements following the 2023 'PACCAR ruling.' The court held that payment waterfalls, where a funder's fee is calculated as a multiple of funds invested and paid from the proceeds, are not inherently covered by the Damages-Based Agreements Regulations 2013 (DBA Regulations).
This decision helps to reduce uncertainty in the litigation funding market, which has been impacted by the expansive interpretation of the DBA Regulations in the original 'PACCAR ruling.' The Court of Appeal's judgment distinguishes between different fee structures, affirming the enforceability of certain common funding models.
While this ruling provides welcome legal clarity, it does not provide a complete exemption for all litigation funders from the DBA Regulations, particularly for fees calculated as a percentage of proceeds. The Civil Justice Council's recommendation for legislative action to fully reverse the effects of the 'PACCAR ruling' remains pending.
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