Sony Interactive Entertainment Europe Ltd v Alex Neill Class Representative Ltd

Hearing dates: 10 and 11 June 2025

Approved Judgment

This judgment was handed down remotely at 2.30pm on Friday 4 July 2025 by circulation to the parties or their representatives by e-mail and by release to the National Archives.

Introduction

These appeals which we have heard together all concern the enforceability of litigation funding agreements (“LFAs”) entered into by various class representatives with litigation funders in collective proceedings before the Competition Appeal Tribunal (“the CAT”). The LFAs under consideration were amended from the LFAs originally entered which had been rendered unenforceable as a consequence of the decision of the Supreme Court in R (PACCAR Inc) v Competition Appeal Tribunal [2023] UKSC 28; [2023] 1 WLR 2594 (“ PACCAR”). In that case, the majority of the Supreme Court (Lady Rose JSC dissenting) held that the LFAs in question were damages-based agreements (“DBAs”) under section 58AA of the Courts and Legal Services Act 1990 (“the CLSA”) since the funder was providing “claims management services” within that section and, in consequence, the LFAs were unenforceable.

So far as material to these appeals, section 58AA of the CLSA in its current form provides as follows:

“58AA Damages-based agreements

(1) A damages-based agreement which satisfies the conditions in subsection (4) is not unenforceable by reason only of its being a damages-based agreement.

(2) But … a damages-based agreement which does not satisfy those conditions is unenforceable.

(3) For the purposes of this section—

(a) a damages-based agreement is an agreement between a person providing advocacy services, litigation services or claims management services and the recipient of those services which provides that—

(i) the recipient is to make a payment to the person providing the services if the recipient obtains a specified financial benefit in connection with the matter in relation to which the services are provided, and

(ii) the amount of that payment is to be determined by reference to the amount of the financial benefit obtained.

(4) The agreement—

(a) must be in writing;

(aa) must not relate to proceedings which by virtue of section 58A(1) and (2) cannot be the subject of an enforceable conditional fee agreement or to proceedings of a description prescribed by the Lord Chancellor;

(b) if regulations so provide, must not provide for a payment above a prescribed amount or for a payment above an amount calculated in a prescribed manner;

(c) must comply with such other requirements as to its terms and conditions as are prescribed; and

(d) must be made only after the person providing services under the agreement has complied with such requirements (if any) as may be prescribed as to the provision of information.

(5) Regulations under subsection (4) are to be made by the Lord Chancellor and may make different provision in relation to different descriptions of agreements.

…

(7) In this section—

…

‘claims management services’ has the same meaning as in the Financial Services and Markets Act 2000 (see section 419A of that Act).”

The “funder's fee” in the original LFAs in PACCAR and in the present cases was calculated as a percentage of the proceeds which the class representative would recover if the proceedings were successful. In broad terms, the revised LFAs provide that the funder's fee is to be calculated as a multiple or multiples of the funder's outlay (or its committed outlay) in the proceedings, although it is still paid out of the proceeds. The revised LFAs also provide, expressly or by implication, that the amount of the funder's recovery is capped at the level of the proceeds recovered (or some possible subset thereof).

In each of the cases under appeal, the CAT found that the revised LFAs were not DBAs so that the LFAs are enforceable. The unsuccessful defendants appeal in each case with the permission of the CAT.

It is agreed between the parties that the appeals raise three issues:

(1) If the amount payable to a funder or insurer under the LFAs is payable from and/or capped by the proceeds of a successful outcome, is the amount of the payment “ to be determined by reference to the amount of the financial benefit obtained” for the purposes of s.58AA(3)(a)(ii) of the CLSA? This issue arises in all the appeals.

(2) If the LFAs provide that the funder or insurer is paid a percentage of the proceedings, “ only to the extent enforceable and permitted by applicable law” (or similar), is it a DBA, otherwise impermissible, or inappropriate for the purposes of certification? This issue arises in the Neill and CICC appeals.

(3) If the LFA is unenforceable and/or unlawful, can any parts of it be severed? This issue only arises in the Neill appeal.

A fourth issue arose in the Kent appeal alone concerning “ratchet” arrangements whereby the funder's fee increased, but on 5 June 2025, the solicitors for Apple in that case informed the Court that this issue was no longer pursued in the appeal.

Background

The Neill proceedings involve a standalone claim against Sony concerning alleged restrictive terms and conditions and/or technical restraints in breach of Article 102 of the Treaty on the Functioning of the European Union (“TFEU”) in that it requires sole distribution of digital games for its PlayStation video games console via its PlayStation Store and imposes excessive and unfair prices for distribution via the PlayStation Store, which is said to have caused PlayStation's users loss and damages valued at between £600 million to £5 billion (excluding interest).

The CICC proceedings concern standalone claims brought by card merchants for the imposition of inter-regional and commercial card transactions fees in the UK and/or EEA by Mastercard and Visa in alleged breach of Article 101 TFEU in such a manner as to artificially raise prices leading to the class being overcharged.

The Kent proceedings bring standalone claims against Apple concerning alleged excessive pricing and/or exclusionary abuses in breach of Article 102...