Competition Litigation Funding Doesn’t Grow on Trees – Unintended Consequences of The UKSC’s PACCAR Decision
By: Sebastian Peyer, Adrian Render, Chris Thomas (Center for Competition Policy)
The recent PACCAR Supreme Court ruling has brought the issue of litigation funding for opt-out actions into sharp focus. In this blog post, we conduct a thorough analysis of a non-binding remark made by the Supreme Court in the judgment, indicating that litigation funders can only recover their funding and returns on investment when not all awarded damages can be distributed to class members.
This recovery is contingent upon an order from the Competition Appeal Tribunal permitting funders to claim any remaining funds. Contrary to the Court’s assertion, we contend that litigation funders can and should be compensated before potential damages are allocated to the class post-judgment. While the Supreme Court’s statement does not carry legal binding, the persistent uncertainty regarding the reimbursement of funders’ success fees adversely impacts the accessibility of litigation funding for opt-out collective actions, particularly for ‘good’ claims representing small and medium-sized groups.
Since 2015 the UK Competition Act (“CA”) permits opt-out collective actions whereby a representative can bring a claim on behalf of groups of injured consumers or businesses without the need for the group members to explicitly opt-in. After a slow start, the opt-out action regime has become increasingly attractive as demonstrated by the rising number of applications in the Competition Appeal Tribunal (“CAT” or “Tribunal”). As part of section 47B CA, an applicant seeking to bring an opt-out collective action must secure a collective proceedings order (“CPO”) from the CAT. The CAT will grant a CPO if the claims are eligible for inclusion in collective proceedings and the Tribunal can authorise the proposed class representative. A material part of the authorisation test is that applicants need to show that they have adequate funding arrangements in place to meet their own costs and any adverse costs order made against them. While funding is not explicitly mentioned as a prerequisite of opt-out actions in sections 47B ff., bringing collective actions invariably involves third-party litigation funding whereby a funder provides the means to the class representative to pursue the action. In a nutshell, without litigation funding, there is no CPO and, consequently, no opt-out collective action…