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PACCAR’s tidal wave effects: Understanding the Legal, Financial and Policy impacts of a highly controversial ruling

By Ana Carolina Salomao |

The following is a contributed piece by Ana Carolina Salomão, Leila Zoe-Mezoughi, Micaela Ossio Maguiña and Sarah Voulaz, of Pogust Goodhead.

This article follows our previous publication dated 10 October 2023 regarding the Supreme Court ruling in PACCAR[1] on third-party litigation funding agreements which, very simply put, decided that litigation funding agreements (“LFAs”), permitting funders to recover a percentage of damages, amounted to (“DBAs”) damages-based agreements by virtue of s.58AA of the Courts and Legal Services Act 1990 (the “1990 Act”). As such, all LFAs (including those retrospectively drafted) were consequently required to comply with the Damages-Based Agreements Regulations 2013 (the “2013 Regulations”) or be deemed, unenforceable.

In this article, we explore the three main industry-wide changes that have arisen as a direct result of the PACCAR ruling:

  1. The diverse portfolio of LFA reformulation strategies deployed by litigation finance stakeholders.
  2.  The government response, both in terms of official statements and policy changes, which have ultimately led to the draft bill of 19 March 2024.
  3.  The wave of litigations subsequent to the PACCAR ruling, giving insight into the practical market consequences of the ruling.

Ultimately, the PACCAR impact and its proposed reversal has not undermined the UK litigation finance market, in fact the contrary; it has promoted visibility and adaptation of a litigation finance market that continues to gain significant traction in the UK. As a result, despite the concern shown by most UK industry stakeholders about the negative impacts of the PACCAR ruling, this article argues that proper regulation could indeed be highly advantageous, should it incentivise responsible investment, whilst protecting proper access to justice. However, the question does remain, will we ever get there?

The LFA reformulation storm.

As expected, the first reaction to PACCAR came from the litigation finance market. As anticipated, LFAs (those with an investor return formula based on a percentage of the damages recovered) are being amended by parties to avoid their potential unenforceability.

The majority of amendments being implemented are aimed to design valuation methodologies for the amount recovered, which are not directly related to the damages recovered, but are rather a function of some other metric or waterfall, therefore involving a process of alteration of pricing. The intention is for the agreements to fall out of the scope of the definition of ‘claims management services’ provided by section 58AA of the Courts and Legal Services Act 1990 (CLSA), which stipulates two main criteria: (i) the funder is paid if the litigation succeeds, and (ii) the amount paid back to the funder is a function of the amounts recovered by the claimant in damages. As such, novel pricing structures such as charging the amount granted in third-party funding with accrued interest; a multiple of the funded amount; or even a fixed pre-agreed amount recovered in the form of a success fee, would not meet both criteria and would hence fall outside of the legal definition of claims management services. These options would avoid the risk of an LFA being bound to the same requirements of a DBA and potentially rendered unenforceable.[2]

Another option to render LFAs enforceable following PACCAR is of course to make these compliant to the definition of DBA provided in s.58AA(2) of the 1990 Act. As such, LFAs would be subjected to stringent statutory conditions as per the Damages-Based Agreements Regulations 2013 (the “2013 Regulations”). This option has however not been the most attractive for funders, firstly due to funders not necessarily conducting claims management services and, secondly, because LFAs would automatically become subject to highly stringent rules to structure the agreements and pursue recovery. For example, such LFAs would need to comply with the cap requirements outlined in the 2013 Regulations such as: 25% of damages (excluding damages for future care and loss) in personal injury cases, 35% on employment tribunal cases and 50% in all other cases.

Ultimately, it can be argued that the choice for restructuring a single LFA or a portfolio of LFAs will vary on a case-by-case basis. Those parties who find themselves at more advanced stages of proceedings will be disadvantaged due to the significant challenges they are likely to face in restructuring such LFAs. From the perspective of the legal sector, on the one hand, we can see an increase in law firms’ portfolio lending, whereby the return to funders is not directly related to damages recovered by the plaintiff. On the other hand, there are certain actors who are remaining only superficially affected by the ruling, such as all funding facilities supporting law firms which raise debt capital collateralised by contingent legal fees.

The introduction of the proposed bill by the government (which is discussed below), is a reflection of the enormous burden the Supreme Court ruling has placed on critical litigation funder stakeholders who are likely to have invested disproportionate sums to amend their LFAs and restructure their litigation portfolios. However, the bill has also given momentum to the sector and is helping to highlight the importance of diversification in litigation funding to protect the interests of low-income claimants. The medium-term net balance of the regulation might be rendered positive if redirected at perfecting and not prohibiting third-party funding agreements to protect access to justice.

The UK Government Intervention.

The UK government has raised concerns regarding the legal and financial impacts of PACCAR relatively swiftlyfollowingthe 26 July 2023 judgement. Their first response to PACCAR came from the Department of Business and Trade (DBT) at the end of August 2023. The DBT stated that, being aware of the Supreme Court decision in PACCAR, it would be “looking at all available options to bring clarity to all interested parties.”[3]

In the context of opt-out collective proceedings before CAT, the government proposed in November 2023 amendments to the Digital Markets, Competition and Consumers Bill (DMCC) through the introduction of clause 126, which sought to implement changes to the Competition Act 1998 (CA) to provide that an LFA would not count as a DBA in the context of opt-out collective proceedings in the CAT. This proposal came from the understanding that after PACCAR opt-out collective proceedings would face even greater challenges considering that under c.47C(8) of the CA 1998 DBAs are unenforceable when relating to opt-out proceedings. Proposals for additional amendments to the DMCC soon followed, many of which await final reading and approval by the House of Lords. However, in December 2023 Lord Sandhurst (Guy Mansfield KC) noted that while amendments to the DMCC would mitigate PACCAR’s impact on LFAs for opt-out collective proceedings in the CAT, “the key issue is that the Supreme Court’s PACCAR ruling affects LFAs in all courts, not just in the CAT, and not just, as this clause 126 is designed to address, in so-called opt-out cases.”

As a response to this, the Ministry of Justice announced last March that the government intended to extend the approach taken for opt-out collective proceedings in the CAT to all forms of legal proceedings in England and Wales by removing LFAs from the DBAs category entirely. The statement promised to enact new legislation which would “help people pursuing claims against big businesses secure funding to take their case to court”and“allow third parties to fund legal cases on behalf of the public in order to access justice and hold corporates to account”.[4]

Following this announcement, the Litigation Funding Agreements (Enforceability) Bill was published and introduced to the House of Lords. As promised by the government’s previous statements, the primary purpose of the Bill is to prevent the unenforceability of legitimate LFAs fitting into the amended DBA definition of PACCAR. Indeed, the bill aims to restore the status quo by preventing litigation funding agreements from being caught by s.58AA of the 1990 Act.[5]

The litigation wave.

As parliamentary discussions continue, all eyes are now in the Court system and the pending decisions in litigations arising from PACCAR. Despite the government’s strong stance on this matter, the bill is still in early stages. The second reading took place in April 2024, where issues such as the retrospective nature of the Bill, the Civil Justice Council’s (CJC) forthcoming review of litigation funding, and the need to improve regulations on DBAs, were discussed. Nevertheless, despite the arguable urgency of addressing this issue for funders and the litigation funding market, there is no indication that the bill will be expedited; hence the next step for the bill passage is the Committee stage. The myriad of cases arising from PACCAR may need to stay on standstill for a while, as Courts are likely to await the outcome of the proposed bill before deciding on individual matters.

The UK has a longstanding history of tension between the judiciary power and the two other spheres of the government, the Executive and Parliament. Most of these instances have sparked public debate and have profoundly changed the conditions affecting the market and its players. For example, in the case of R (on the application of Miller and another) (Respondents) v Secretary of State for Exiting the European Union (Appellant) [2017] UKSC 5, Gina Miller launched legal proceedings against the Johnson government to challenge the government’s authority to invoke Article 50 of the Treaty of European Union, which would start the process for the UK to leave the EU, without the Parliament’s authorisation. The High Court decided that, given the loss of individual rights that would result from this process, Parliament and not the Executive should decide whether to trigger Article 50, and the Supreme Court confirmed that Parliament’s consent was needed.

Another example is the more recent case of AAA (Syria) & Ors, R (on the application of) v Secretary of State for the Home Department [2023] UKSC 42 regarding the Rwanda deportation plan. In this case the Supreme Court ruled unanimously that the government’s policy of deporting asylum seekers to Rwanda was unlawful – in agreement with the Court of Appeal’s decision which found that the policy would pose a significant risk of refoulement.

Nevertheless, rushing the finalisation of a bill reversing PACCAR would probably be a counterproductive move. The recent developments suggest that policy makers should focus on deploying a regulatory impact assessment on any regulations aimed at improving access to finance in litigation. Regulators and legislators should ensure that, before designing new regulatory frameworks for litigation finance,  actors from the litigation finance industry are consulted, to ensure that such regulations are adequate and align with the practical realities of the market.

As the detrimental impacts of PACCAR become ever more visible, public authorities should prioritise decisions that favour instilling clarity in the market, and most importantly, ensuring proper access to justice remains upheld in order to “strike the right balance between access to justice and fairness for claimants”.  

A deeper look into the post-PACCAR’s litigations and their domino effects

Even though the English court system is yet to rule on any post-PACCAR case, it is important to understand the immediate effects of the decision by looking at a few landmark cases. We provide in this section of the article an overview of the impacts of the rulingin perhaps the three most important ongoing post-PACCAR proceedings: Therium Litigation Funding A IC v. Bugsby Property LLC (the “Therium litigation”), Alex Neill Class Representative Ltd v Sony Interactive Entertainment Europe Ltd [2023] CAT 73 (the “Sony litigation”) and the case of Alan Bates and Others v Post Office Limited [2019] EWHC 3408 (QB), which led to what has been known as the “Post Office scandal” (also referred to as the “Horizon scandal”).

Therium litigation

The Therium litigation is one of the first cases in which an English court considered questions as to whether an LFA amounted to a DBA following the Supreme Court decision in PACCAR. The case concerned the filing of a freezing injunction application by Therium Litigation Funding I AC (“Therium”) who had entered into an LFA with Bugsby Property LLC (“Bugsby”) in relation to a claim against Legal & General Group (“L&G”). The LFA stipulated between Therium and Bugsby entitled Therium to (i) return of the funding it had provided; (ii) three-times multiple of the amount funded; and (iii) 5% of any damages recovered over £37 million, and compelled Bugsby’s solicitors to hold the claim proceeds on trust until distributions had been made in accordance with a waterfall arrangement set out in a separate priorities’ agreement.

Following a settlement reached between Bugsby and L&G, Bugby’s solicitors transferred a proportion of settlement monies to Bugsby’s subsidiary, and notified Therium of the intention to transfer the remaining amount to Bugsby on the understanding that the LFA signed between Therium and Bugsby was unenforceable as it amounted to a DBA following the PACCAR ruling. Therium applied for an interim freezing injunction against Bugsby under s.44 of the Arbitration Act 1996 and argued that, as the payment scheme stipulated by the LFA contained both a multiple-on-investment and a proportion of damage clauses, and the minimum recovery amount to trigger the damage-based recovery had not been reached, no damage-based payment was foreseen.

This meant that the DBA clause within the LFA could be struck off without changing the nature of the original LFA, so that it constituted an “agreement within an agreement”. As legal precedents such as the Court of Appeal ruling in Zuberi v Lexlaw Ltd [2021] EWCA Civ 16 allowed for parts of an agreement to be severed so as to render the remainder of the agreement enforceable, the High Court granted the freezing injunction, affirming that a serious question was raised by Therium regarding whether certain parts of the agreement could be severed to keep the rest of the LFA enforceable.

By declaring that there was a serious question to be tried as to whether the non-damage clauses, such as the multiple-based payment clauses, are lawful or not, the High Court opened the possibility of enforceability of existing LFAs through severability of damage-based clauses in instances where PACCAR may also apply. The Therium litigation presents an example of another possible structuring strategy to shape LFAs to prevent them from becoming unenforceable under PACCAR. Nonetheless, as the freezing injunction will now most likely lead to an arbitration, a final Court ruling on the validity of these non-damage-based schemes appears to be unlikely.

Sony litigation

The Sony group litigation is another example of one of the first instances where issues of compliance of a revised LFA have been addressed in the aftermath of PACCAR, this time in the context of CAT proceedings. In this competition case, Alex Neill Class Representative Limited, the Proposed Class Representative (PCR), commenced collective proceedings under section 47B of the CA 1998 against Sony Interactive Entertainment Network Europe Limited and Sony Interactive Entertainment UK Limited (“Sony”). The claimant alleged that Sony abused its dominant market position in compelling publishers and developers to sell their gaming software through the PlayStation store and charging a 30% commission on these sales.

The original LFA entered between Alex Neill and the funder as part of the Sony litigation amounted to a DBA and would have therefore been unenforceable pursuant to PACCAR. On this basis, the PCR and funder negotiated an amended LFA designed to prevent PACCAR enforceability issues. The LFA in place was amended to include references for funders to obtain a multiple of their total funding obligation or a percentage of the total damages and costs recovered, only to the extent enforceable and permitted by applicable law. The LFA was also amended to include a severance clause confirming that damages-based fee provisions could be severed to render the LFA enforceable.

The CAT ultimately agreed with the position of the PCR and confirmed that the revised drafting “expressly recognise[d] that the use of a percentage to calculate the Funder’s Fee will not be employed unless it is made legally enforceable by a change in the law.” In relation to the severance clause, the CAT also expressly provided that such clause enabled the agreement to avoid falling within the statutory definition of a DBA and referred to the test for effective severance clauses.

The CAT’s approach in recognising the PACCAR ruling and yet allowing for new means to render revised LFAs enforceable in light of this decision provides a further example of a Court’s interpretation of the decision, allowing another route for funders to prevent the unenforceability of agreements. Allowing these clauses to exempt litigation funders from PACCAR will in fact allow for such clauses to become market standard for LFAs, and in this case particularly for those LFAs backing opt-out collective proceedings in the CAT.

Post Office scandal  

Although the Post Office scandal occurred in 2019, this case was only recently brought back to light following the successful tv series ‘Mr Bates vs The Post Office’ which recounts the story of the miscarriage of justice suffered by hundreds of sub-postmasters and sub-postmistresses (SPM’s) in the past two decades. In short, the Post Office scandal concerned hundreds of SPM’s being unjustly taken to court for criminal offences such as fraud and false accounting, whilst in reality the Horizon computer system used by Post Office Ltd (POL) was found to contain errors that caused  inaccuracies in the system.

Mr. Bates, leading claimant in the case, brought the case on behalf of all the SMP’s which had been unfairly treated by POL. The issuing of the claim was only made possible thanks to a funding arrangement between litigation funders and the SPM’s, used as a basis for investors to pay up front legal costs. As outlined in a publication by Mr Bates in January 2024, such financing, combined with the strength and defiance of Mr. Bates’ colleagues, allowed the case to be brought forward, a battle which in today’s circumstances the postmaster believes would have certainly been lost.[6]

The sheer scale of the Post Office scandal, and the fact that traditional pricing vehicles for legal services would have negated the claimants access to justice, placed the case near the top of the government’s agenda and called again into question the effect of PACCAR on access to justice. Justice Secertary Alex Chalk MP relied on the example of Mr Bates and the Post Office scandal to affirm that that “for many claimants, litigation funding agreements are not just an important pathway to justice – they are the only route to redress.”[7]In light of this recent statement more radical changes to legislation on litigation funding and the enforceability of LFAs appear to be on the horizon.

Conclusion

Assessing the long-term impact of PACCAR will ultimately need to wait until the dust in the litigation finance market settles. Nonetheless, the immediate impacts of the decision have brought four key considerations to light.

First, the relevance of the litigation funding industry in the UK is substantial and any attempt to regulate it impacts not only those who capture value from the market but also the wider society. Regulation of litigation funding could inadvertently affect wider policy questions such as equal access to justice, consumer rights, protection of the environment and human rights.

Second, there is an undeniable intention of the regulators to oversee the litigation finance market, which could reflect in stability and predictability that would be much welcomed by institutional investors and other stakeholders. However, this conclusion assumes that regulatory efforts will be preceded by robust impact assessment and enforced within clear guardrails, always prioritising stability and ensuring proper access to justice.

Third, PACCAR serves to bring awareness that attempts to regulate a market in piecemeal can lead to detrimental outcomes and high adapting costs, far offsetting any positive systemic effects brought by the new framework. Any attempts to regulate a market so complex and relevant for the social welfare should be well-thought-out with the participation of key stakeholders.

Fourth, despite the recent headwinds, the market and government reaction further prove that the litigation finance market continues its consolidation as an effective vehicle to drive value for claimants and investors. The fundamentals behind the market’s growth are still solid and the asset class is consolidating as a strategy to achieve portfolios’ uncorrelation with normal market cycles. As private credit and equity funds as well as venture capitalists, hedge funds and other institutions compete to increase their footprint in this burgeoning market, it is safe to expect a steady increase of market size and investors’ appetite for the thesis.

In conclusion, despite a first brush view of the PACCAR decision, the reactions to this decision and the subsequent developments have evidenced how litigation finance continues to be a promising investment strategy and an effective tool to drive social good and access to justice.

[1] Ana Carolina Salomao, Micaela Ossio and Sarah Voulaz, Is the Supreme Court ruling in PACCAR really clashing with the Litigation Finance industry? An overview of the PACCAR decision and its potential effects, Litigation Finance Journal, 10 October 2023.

[2] Daniel Williams, Class Action Funding: PACCAR and now Therium – what does it mean for class action litigation?, Dwf, October 25, 2023.

[3] Department for Business and Trade statement on recent Supreme Court decision on litigation funding: A statement from the department in response to the Supreme Court’s Judgement in the case of Paccar Inc. and others vs. Competition Tribunal and others. Available at: <https://www.gov.uk/government/news/department-for-business-and-trade-statement-on-recent-supreme-court-decision-on-litigation-funding>.

[4] Press release, ‘New law to make justice more accessible for innocent people wronged by powerful companies’ (GOV.UK, 4 March 2024) Available at <https://www.gov.uk/government/news/new-law-to-make-justice-more-accessible-for-innocent-people-wronged-by-powerful-companies>.

[5] Litigation Funding Agreements (Enforceability) Bill (Government Bill originated in the House of Lords, Session 2023-24) Available at <https://bills.parliament.uk/bills/3702/publications>.

[6] Alan Bates, ‘Alan Bates: Why I wouldn’t beat the Post Office today’ (Financial Times, 12 January 2024) <https://www.ft.com/content/1b11f96d-b96d-4ced-9dee-98c40008b172>.

[7] Alex Chalk, ‘Cases like Mr Bates vs the Post Office must be funded’ (Financial Times, 3 March 2024) <https://www.ft.com/content/39eeb4a6-d5bc-4189-a098-5b55a80876ec?accessToken=zwAGEsgQoGRQkc857rSm1bxBidOgmFtVqAh27A.MEQCIBNfHrXgvuIufYajr8vp1jmn9z9H9Bwl0FC-u96h8f4LAiBumh82Jxp30mqQsGb71VSoAmYWUwo9YBO2kF5wuMP5QA&sharetype=gift&token=7a7fe231-8fea-4a0d-9755-93fc3e3689aa>.

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Ana Carolina Salomao

Ana Carolina Salomao

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Commercial People Moves

Therium Cuts UK Jobs as Part of Strategic Reorganisation

By Harry Moran |

Recent years have been described as a time of substantial growth and expansion in the global litigation funding market, yet new reporting suggests that one of the industry’s most well-known funders is downsizing its workforce.

An article in The Law Society Gazette provides a brief insight into ongoing changes being made at litigation funder Therium, reporting that the company is undertaking a number of layoffs as part of plans to restructure the business. The article states that these job cuts have been made to Therium’s UK workforce, with the business claiming the cuts are motivated by strategic reorganisation rather than financial pressures. 

There are no details currently available as to which employees have been let go, with Therium having removed the ‘Our People’ section of its website. The Gazette also discovered the incorporation of a new company called Therium Capital Advisors LLP on 15 April 2025, through a review of Companies House records. The new entity’s records list Therium’s chief investment officer, Neil Purslow, and investment manager, Harry Stockdale, as its two designated members. 

Companies House records also show that Therium filed a ‘termination of appointment of secretary’ for Martin Middleton on 19 March 2025. Mr Middleton’s LinkedIn profile currently lists his position as Therium’s chief financial officer, having first joined the funder as a financial controller over 15 years ago.

At the time of reporting, Therium has not responded to LFJ’s request for comment.

Commercial Special Features

Litigation Funding in GCC Arbitration

By Obaid Mes’har |

The following piece was contributed by Obaid Saeed Bin Mes’har, Managing Director of WinJustice.

Introduction

A Practical Overview

Third-party litigation funding (TPF)—where an external financier covers a claimant’s legal fees in exchange for a share of any resulting award—has gained significant traction in arbitration proceedings across the Gulf Cooperation Council (GCC). Historically, TPF was not widely used in the Middle East, but recent years have seen a notable increase in its adoption, particularly in the United Arab Emirates (UAE). The economic pressures introduced by the COVID-19 pandemic, coupled with the high costs of complex arbitrations, have prompted many parties to view TPF as an effective risk-management strategy. Meanwhile, the entry of global funders and evolving regulatory frameworks highlight TPF’s emergence as a key feature of the GCC arbitration landscape.

Growing Adoption

Although the initial uptake was gradual, TPF is now frequently employed in high-value disputes across the GCC. Observers in the UAE have noted a discernible rise in funded cases following recent legal developments in various jurisdictions. Major international funders have established a presence in the region, reflecting the growing acceptance and practical utility of TPF. Similar growth patterns are evident in other GCC countries, where businesses have become increasingly aware of the advantages offered by third-party financing.

By providing claimants with the financial resources to pursue meritorious claims, third-party funding is reshaping the dispute-resolution landscape. As regulatory frameworks evolve and more funders enter the market, it is anticipated that TPF will continue to gain prominence, offering both claimants and legal professionals an alternative means of managing arbitration costs and mitigating financial risk.

Types of Cases

Funders are chiefly drawn to large commercial and international arbitration claims with significant damages at stake. The construction sector has been a key source of demand in the Middle East, where delayed payments and cost overruns lead to disputes; contractors facing cash-flow strain are increasingly turning to third-party funding to pursue their claims. High-stakes investor–state arbitrations are also candidates – for instance, in investment treaty cases where a government’s alleged expropriation deprives an investor of its main asset, funding can enable the claim to move forward . In practice, arbitration in GCC hubs like Dubai, Abu Dhabi, and others is seeing more funded claimants, leveling the field between smaller companies and deep-pocketed opponents.

Practical Utilization

Law firms in the region are adapting by partnering with funders or facilitating introductions for their clients. Many firms report that funding is now considered for cases that clients might otherwise abandon due to cost. While precise data on usage is scarce (as most arbitrations are confidential), anecdotal evidence and market activity indicate that third-party funding, once rare, is becoming a common feature of significant arbitration proceedings in the GCC. This trend is expected to continue as awareness grows and funding proves its value in enabling access to justice.

Regulatory Landscape and Restrictions on Third-Party Funding

UAE – Onshore vs. Offshore

The United Arab Emirates illustrates the region’s mixed regulatory landscape. Onshore (civil law) UAE has no specific legislation prohibiting or governing litigation funding agreements . Such agreements are generally permissible, but they must not conflict with Sharia principles – for example, funding arrangements should avoid elements of excessive uncertainty (gharar) or speculation . Parties entering funding deals for onshore cases are cautioned to structure them carefully in line with UAE law and good faith obligations. In contrast, the UAE’s common-law jurisdictions – the Dubai International Financial Centre (DIFC) and Abu Dhabi Global Market (ADGM) – explicitly allow third-party funding and have established clear frameworks.

The DIFC Courts issued Practice Direction No. 2 of 2017, requiring any funded party to give notice of the funding and disclose the funder’s identity to all other parties . The DIFC rules also clarify that while the funding agreement itself need not be disclosed, the court may consider the existence of funding when deciding on security for costs applications and retains power to order costs against a funder in appropriate cases. Similarly, the ADGM’s regulations (Article 225 of its 2015 Regulations) and Litigation Funding Rules 2019 set out requirements for valid funding agreements – they must be in writing, the funded party must notify other parties and the court of the funding, and the court can factor in the funding arrangement when issuing cost orders . The ADGM rules also impose criteria on funders (e.g. capital adequacy) and safeguard the funded party’s control over the case .

In sum, the UAE’s offshore jurisdictions provide a modern, regulated environment for third-party funding, whereas onshore UAE allows it in principle but without detailed regulation.

Other GCC Countries

Elsewhere in the GCC, explicit legislation on litigation funding in arbitration remains limited, but recent developments signal growing acceptance. Saudi Arabia, Qatar, Oman, and Kuwait do not yet have dedicated statutes or regulations on third-party funding . However, leading arbitral institutions in these countries have proactively addressed funding in their rules. Notably, the Saudi Center for Commercial Arbitration (SCCA) updated its Arbitration Rules in 2023 to acknowledge third-party funding: Article 17(6) now mandates that any party with external funding disclose the existence of that funding and the funder’s identity to the SCCA, the tribunal, and other parties . This ensures transparency and allows arbitrators to check for conflicts. 

Likewise, the Bahrain Chamber for Dispute Resolution (BCDR) included provisions in its 2022 Arbitration Rules requiring a party to notify the institution of any funding arrangement and the funder’s name,, which the BCDR will communicate to the tribunal and opponents . The BCDR Rules further oblige consideration of whether any relationship between the arbitrators and the funder could compromise the tribunal’s independence. These rule changes in Saudi Arabia and Bahrain align with international best practices and indicate regional momentum toward formal recognition of third-party funding in arbitration.

Disclosure and Transparency

A common thread in the GCC regulatory approach is disclosure. Whether under institutional rules (as in DIAC, SCCA, BCDR) or court practice directions (DIFC, ADGM), funded parties are generally required to disclose that they are funded and often to reveal the funder’s identity . For instance, the new DIAC Arbitration Rules 2022 expressly recognize third-party funding – Article 22 obliges any party who enters a funding arrangement to promptly inform all other parties and the tribunal, including identifying the funder. DIAC’s rules even prohibit entering a funding deal after the tribunal is constituted if it would create a conflict of interest with an arbitrator. This emphasis on transparency aims to prevent ethical issues and later challenges to awards. It also reflects the influence of global standards (e.g. 2021 ICC Rules and 2022 ICSID Rules) which likewise introduced funding disclosure requirements.

Overall, while no GCC jurisdiction outright bans third-party funding, the patchwork of court practices and arbitration rules means parties must be mindful of the specific disclosure and procedural requirements in the seat of arbitration or administering institution. In jurisdictions rooted in Islamic law (like Saudi Arabia), there is an added layer of ensuring the funding arrangement is structured in a Sharia-compliant way (avoiding interest-based returns and excessive uncertainty. We may see further regulatory development – indeed, regional policymakers are aware of litigation funding’s growth and are considering more formal regulation to provide clarity and confidence for all participants .

The GCC region has seen several important developments and trends related to third-party funding in arbitration:

  • Institutional Rule Reforms: As detailed earlier, a number of arbitral institutions in the GCC have updated their rules to address third-party funding, marking a significant trend. The Dubai International Arbitration Centre (DIAC) 2022 Rules, the Saudi SCCA 2023 Rules, and the Bahrain BCDR 2022 Rules all include new provisions on funding disclosures. This wave of reforms in 2022–2023 reflects a recognition that funded cases are happening and need basic ground rules. By explicitly referencing TPF, these institutions legitimize the practice and provide guidance to arbitrators and parties on handling it (primarily through mandatory disclosure and conflict checks). The adoption of such rules brings GCC institutions in line with leading international forums (like ICC, HKIAC, ICSID, etc. that have also moved to regulate TPF).
  • DIFC Court Precedents: The DIFC was one of the first in the region to grapple with litigation funding. A few high-profile cases in the DIFC Courts in the mid-2010s involved funded claimants, which prompted the DIFC Courts to issue Practice Direction 2/2017 as a framework. This made the DIFC one of the pioneers in the Middle East to formally accommodate TPF. Since then, the DIFC Courts have continued to handle cases with funding, and their decisions (for example, regarding cost orders against funders) are building a body of regional precedent on the issue. While most of these cases are not public, practitioners note that several DIFC proceedings have featured litigation funding, establishing practical know-how in dealing with funded parties. The DIFC experience has likely influenced other GCC forums to be more accepting of TPF.
  • Funders’ Increased Presence: Another trend is the growing confidence of international funders in the Middle East market. Over the last couple of years, top global litigation financiers have either opened offices in the GCC or actively started seeking cases from the region. Dubai has emerged as a regional hub – beyond Burford, other major funders like Omni Bridgeway (a global funder with roots in Australia) and IMF Bentham (now Omni) have been marketing in the GCC, and local players or boutique funders are also entering the fray . This increased competition among funders is good news for claimants, as it can lead to more competitive pricing and terms for funding. It also indicates that funders perceive the GCC as a growth market with plenty of high-value disputes and a legal environment increasingly open to their business.
  • Types of Arbitrations Being Funded : In terms of case trends, funded arbitrations in the GCC have often involved big-ticket commercial disputes – for example, multi-million dollar construction, energy, and infrastructure cases. These are sectors where disputes are frequent and claims sizable, but claimants (contractors, subcontractors, minority JV partners, etc.) may have limited cash after a project soured. Third-party funding has started to play a role in enabling such parties to bring claims. There have also been instances of investor-state arbitrations involving GCC states or investors that utilized funding (though specific details are usually confidential). The Norton Rose Fulbright report notes that funding is especially helpful in investor-treaty cases where an investor’s primary asset was taken by the state, leaving them dependent on external financing to pursue legal remedies.

As GCC countries continue to attract foreign investment and enter into international treaties, one can expect more ICSID or UNCITRAL arbitrations connected to the region – and many of those claimants may turn to funders, as is now common in investment arbitration globally.

  • Emerging Sharia-Compliant Funding Solutions: A unique trend on the horizon is the development of funding models that align with Islamic finance principles. Given the importance of Sharia law in several GCC jurisdictions, some industry experts predict the rise of Sharia-compliant litigation funding products. These might structure the funder’s return as a success fee in the form of profit-sharing or an award-based service fee rather than “interest” on a loan, and ensure that the arrangement avoids undue uncertainty. While still nascent, such innovations could open the door for greater use of funding in markets like Saudi Arabia or Kuwait, by removing religious/legal hesitations. They would be a notable evolution, marrying the concept of TPF with Islamic finance principles – a blend particularly suitable for the Gulf.

Overall, the trajectory in the GCC arbitration market is clear: third-party funding is becoming mainstream. There have not been many publicly reported court challenges or controversies around TPF in the region – which suggests that, so far, its integration has been relatively smooth. On the contrary, the changes in arbitration rules and the influx of funders point to a growing normalization. Businesses and law firms operating in the GCC should take note of these trends, as they indicate that funding is an available option that can significantly impact how disputes are fought and financed.

Conclusion

Litigation funding in the GCC’s arbitration arena has evolved from a novelty to a practical option that businesses and law firms ignore at their peril. With major arbitration centers in the region embracing third-party funding and more funders entering the Middle Eastern market, this trend is likely to continue its upward trajectory. 

For businesses, it offers a chance to enforce rights and recover sums that might otherwise be forgone due to cost constraints. For law firms, it presents opportunities to serve clients in new ways and share in the upside of successful claims. Yet, as with any powerful tool, it must be used wisely: parties should stay mindful of the legal landscape, comply with disclosure rules, and carefully manage relationships to avoid ethical snags. 

By leveraging litigation funding strategically – balancing financial savvy with sound legal practice – stakeholders in the GCC can optimize their dispute outcomes while effectively managing risk and expenditure. In a region witnessing rapid development of its dispute resolution mechanisms, third-party funding stands out as an innovation that, when properly harnessed, aligns commercial realities with the pursuit of justice.

At WinJustice.com, we take pride in being the UAE’s pioneering litigation funding firm. We are dedicated to providing innovative funding solutions that enable our clients to overcome financial hurdles and pursue justice without compromise. By leveraging third-party litigation funding strategically—balancing financial acumen with sound legal practices—stakeholders in the GCC can optimize their dispute outcomes while effectively managing risk and expenditure.

If you are looking to maximize your dispute resolution strategy through expert litigation funding, contact WinJustice.com today. We’re here to help you navigate the evolving landscape and secure the justice you deserve.

Case Developments Commercial

European Commission Fines Apple €500m and Meta €200m for DMA Breaches

By Harry Moran |

Antitrust and competition claims brought against large multinational corporations often represent lucrative opportunities for litigation funders, and the announcement of a new series of fines being imposed on two of the world’s largest technology companies could set the stage for more of these claims being brought in Europe.

Reporting by Reuters covers a major antitrust development as the European Commission has handed down multimillion dollar fines to both Apple and Meta over their breaches of the Digital Markets Act (DMA). These fines follow non-compliance investigations that began in March 2024, with Apple receiving a €500 million fine for breaching its anti-steering obligation through the App Store, and Meta being fined €200 million for breaching the DMA obligation to allow consumers the option to choose a service that uses less of their personal data.

Teresa Ribera, Executive Vice-President for Clean, Just and Competitive Transition at the European Commission, said that the fines “send a strong and clear message”, and that the enforcement action should act as a reminder that “all companies operating in the EU must follow our laws and respect European values.”

In a post on LinkedIn, Gabriela Merino, case manager at LitFin, explained that these fines “mark the first non-compliance decisions issued by the Commission under the new regulatory framework.” As LFJ covered earlier this month, LitFin is funding a €900 million claim against Google in the Netherlands over its anti-competitive practices that were first brought to light by another European Commission investigation. Merino said that “these latest rulings are a welcome boost” to LitFin’s own case.

Statements from both Apple and Meta decried the fines, with the former arguing that the decision was “yet another example of the European Commission unfairly targeting Apple”. 

The full press release from the European Commission detailing the investigations and associated fines can be read here.