UK Government Omits PACCAR Fix From 2026 King’s Speech, Leaving Litigation Funding Reform Uncertain

The UK government’s 2026 King’s Speech did not include legislation to reverse the Supreme Court’s decision in PACCAR ,¹ despite the government’s earlier confirmation that it intended to legislate to clarify that litigation funding agreements are not damages-based agreements. For funders, claimants and defendants, the latest development means the market remains subject to the post-PACCAR framework while the government decides whether and when to bring forward separate legislation.

This alert follows Akin’s December 2025 client alert, “UK Government Confirms Plans to Legislate to Reverse PACCAR and Restore Clarity for Litigation Funding”, which discussed the government’s earlier pledge to introduce legislation clarifying that litigation funding agreements are not damages-based agreements.

Brief Recap: PACCAR and the Expected Fix

In PACCAR, the UK Supreme Court held that litigation funding agreements under which a funder’s return is calculated by reference to a percentage of damages recovered can constitute damages-based agreements under section 58AA of the Courts and Legal Services Act 1990. That decision made many litigation funding agreements under which a funder’s return is calculated by reference to damages or claim proceeds vulnerable to enforceability challenges where they did not comply with the Damages-Based Agreements Regulations 2013, and it was especially significant in opt-out collective proceedings before the Competition Appeal Tribunal.

As discussed in Akin’s prior alert, the Ministry of Justice announced in December 2025 that the government intended to legislate to clarify that litigation funding agreements are not damages-based agreements, with legislation to be introduced “when parliamentary time allows.” The announcement followed the Civil Justice Council’s June 2025 report, which recommended reversing PACCAR as soon as possible.

Latest Development: No Litigation Funding Bill in the King’s Speech

His Majesty King Charles III delivered the 2026 King’s Speech on 13 May 2026, setting out the government’s legislative programme for the new parliamentary session. The official speech and accompanying briefing notes identified a broad legislative agenda, including a Courts Modernisation Bill, Competition Reform Bill, Regulating for Growth Bill and Enhancing Financial Services Bill, but did not include a bill directed at reversing PACCAR or reforming litigation funding agreements.

For funders, the omission is a notable setback: the government’s December 2025 pledge to address PACCAR has not yet translated into proposed legislation in the 2026/2027 parliamentary programme.

Practical Implications

The immediate implication is straightforward: PACCAR remains part of the legal landscape. Litigation funding agreements that entitle funders to a return calculated by reference to damages or settlement recoveries remain exposed to arguments that they are damages-based agreements unless they are drafted to avoid that result or comply with the relevant damages-based agreement regime.

Funders and parties to funded litigation should continue to review existing and proposed litigation funding agreements for enforceability risk, severability, amendment mechanics and any need for court or tribunal approval. Where appropriate, parties may consider returns based on a multiple of capital deployed or committed, rather than a percentage of damages, in light of post-PACCAR commentary and judicial developments indicating that such structures are generally less likely to fall within the damages-based agreement regime.

For ongoing funded cases, parties should also expect funding issues to remain relevant in disputes over certification, settlement approvals, security for costs and the adequacy of funding arrangements.

What to Watch

The omission does not necessarily mean reform is off the table. The government’s December 2025 statement said legislation would be introduced “when parliamentary time allows,” and the King’s Speech states that “other measures” will be laid before Parliament. Stakeholders should monitor whether the government brings forward standalone legislation, adds litigation funding provisions to another bill or consults further on the Civil Justice Council’s broader regulatory recommendations.

In the meantime, funded parties, funders and defendants should continue to monitor judicial treatment of revised litigation funding agreements, Competition Appeal Tribunal settlement approvals and challenges to funding arrangements in live cases. Until legislation is introduced and enacted, careful drafting and early funding-risk analysis remain essential in UK funded litigation.

Footnote

1. R (on the application of PACCAR Inc and others) v Competition Appeal Tribunal and others [2023] UKSC 28.