PACCAR and the King's Speech: What the Silence Tells Us

On 13 May, His Majesty delivered the King's Speech setting out the government's legislative programme for the coming parliamentary session. For the litigation finance industry, the most notable development was what was not included.

Despite the government's 17 December 2025 written ministerial statement indicating an intention to legislate in response to the Supreme Court's decision in PACCAR, no such bill appeared in the programme. There was no dedicated litigation funding bill, no broader reform of the Damages-Based Agreements Regulations, and no firm timetable for legislative action in the King's Speech.

To understand why this matters, it is worth revisiting what PACCAR changed. In 2023, the UK Supreme Court held in R (on the application of PACCAR Inc and others) v Competition Appeal Tribunal that litigation funding agreements providing for a return calculated as a percentage of damages are damages-based agreements. As a result, those agreements are unenforceable unless they comply with the Damages-Based Agreements Regulations 2013.

The decision prompted a significant reassessment across the market. Existing agreements were reviewed and, in many cases, amended. Some collective proceedings experienced delays while parties considered their funding structures. More broadly, the judgment introduced a degree of uncertainty into a market that had previously operated on a widely accepted contractual model.

The government has acknowledged these practical consequences. In its 17 December 2025 written ministerial statement, the government noted concerns that the judgment could make it more difficult to secure third-party funding and could affect the progress of collective actions. While the government indicated that it intended to legislate, that commitment has not yet resulted in a bill, and the King's Speech suggests that reform may not be immediate.

For funders active in the UK market, the legal position remains unchanged. PACCAR continues to govern the enforceability of funding agreements, and structures based on a multiple of committed capital rather than a percentage of recoveries are generally viewed as a more conservative approach. Until legislation is enacted, careful drafting and legal analysis remain essential.

At Erso Capital, we continue to monitor developments closely and structure our UK agreements with the current legal framework in mind. The government's policy direction appears supportive of reform, but until legislative changes are formally enacted, prudence and disciplined structuring remain important features of operating in the UK market.