The EU is gearing up to regulate the third-party litigation funding market following an EU parliamentary vote in favour of the resolution.
The regulations are intended to increase transparency, fairness and proportionality in the market, which until now has escaped formal regulation. Among the proposals is a 40% cap on the percentage of a court award or settlement that funders can claim, requirement for disclosure of third-party financing and for court awards to be sent directly to claimants.
While detractors have argued that the regulations would make financing low and mid-value disputes in member states unviable for funders, it may also present opportunities for the UK, says Julian Chamberlayne, risk and funding partner at disputes-only firm Stewarts: ‘In many European jurisdictions there are already significant impediments to access to justice because of regulations restricting alternative funding arrangements like CFAs and DBAs. Consequently, a move to regulate litigation funding may make it even more difficult for claimants to fund representation, particularly in real David v Goliath cases where you have a group of consumers trying to take on multinationals or governments. This would reinforce the advantage of litigating such claims in the UK, when the jurisdictional rules allow.’
This follows increased scrutiny of funding arrangements by UK courts, Hausfeld competition partner Lucy Rigby notes: ‘The courts are increasingly familiar with the role that litigation funding plays in facilitating access to justice. The certification process for collective actions in the Competition Appeal Tribunal has introduced more direct judicial scrutiny of funding as the tribunal is required to approve the funding as being sufficient to pursue the claim and on appropriate terms. The resulting judgments have been helpful in offering clarity as to the types of arrangements, including as to levels of funding and particular terms of funding agreements, that pass muster.’