Ministers hold fire over retrospective effect of litigation funding bill

Stewart: Two technical amendments

The government is still considering concerns expressed about the retrospective effect of the bill to overturn last year’s Supreme Court ruling in PACCAR, a minister said yesterday.

However, members of the House of Lords backed the retrospective element during the committee stage of the Litigation Funding Agreements (Enforceability) Bill.

Speaking for the Ministry of Justice, Lord Stewart, the Advocate-General for Scotland, acknowledged there were concerns about the possibility of claimants who negotiated new funding agreements following PACCAR facing the prospect of two funding agreements that could be enforced once the bill came into effect.

He referenced too a suggestion in an opinion commissioned from former Director of Public Prosecutions Lord Macdonald that the retrospective effect may interfere with the government’s obligations under the European Convention on Human Rights.

“On behalf of the Lord Chancellor, I thank noble Lords for raising this issue and assure them that the government are looking into the questions raised and hope to provide a further update on report.”

This is the next stage of the bill’s passage through the Lords.

We reported earlier this month that the Ministry of Justice had received a letter before action challenging the retrospective element.

Barrister Lord Carlile, a crossbencher, argued that the bill “would be absolutely pointless if it were not retrospective”.

It was, he said, “created to right a wrong that nobody expected, and it is simply restoring to people the legal rights which they already had”.

Fellow barrister Lord Sandhurst (Guy Mansfield KC), a Conservative, said the government needed to give “good reasons” for legislation to have retrospective effect, “which I believe they have done” in this instance.

He said: “What is important in this case is that before 19 July 2023, government policy endorsed the use of litigation funding agreements…

“The Supreme Court, for good reason, did not have to address that issue of policy as it was not appropriate, but the effect of its decision is that litigants have lost much-needed support.

“If we are to ensure access to justice, particularly against monopolists, we now require a statute to undo that Supreme Court decision and do the best we can to restore the status quo ante.

“We have to hope that this legislation does not induce a spate of future litigation of the wrong satellite nature, but simply allows matters to proceed as they were until July last year.”

Neither peer expressed much worry about the human rights element. Lord Sandhurst said: “The balancing reasons are absolutely clear: this is for access to justice. There may be no perfect answer, but this is the right route – or the least bad route.”

There was support across the chamber for the terms of reference of the Civil Justice Council review of third-party litigation funding, which were published last week.

Liberal Democrat justice spokesman Lord Marks of Henley-on-Thames said he would argue for regulation of the industry and questioned why there were caps on how much lawyers could take under damages-based agreements but not on litigation funders.

For Labour, Lord Ponsonby agreed that the bill should be retrospective, adding that the legislation was also important because “a lot of competitors out there would like this business—Singapore, Australia, Dubai and elsewhere”.

The Lords approved two technical government amendments to widen the bill’s definition of a litigation funding agreement (LFA).

The first changes it to cover an agreement to pay the expenses of unrepresented litigants, such as those of an expert witness.

“Since the expert would not be providing ‘advocacy or litigation services’ within the meaning of the legislation, an agreement to provide funding in this instance would not qualify as an LFA within the current draft definition,” Lord Stewart explained.

The second amendment makes clear that payment of adverse costs funded under an LFA can follow court, tribunal or arbitration proceedings, or as part of a settlement.

The original version specified costs payable “by virtue of a costs order” and Lord Stewart said there was “a legitimate concern” that this could be interpreted too narrowly and lead to satellite litigation over LFAs which neither specifically funded court or tribunal proceedings or envisaged the issue of costs being determined by the court.

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