ALI-ELI Webinar on Third Party Funding of Litigation


On 15 April 2024, the ELI and ALI convened experts for the III ELI Webinar dedicated to Third Party Funding of Litigation.

ELI President, Pascal Pichonnaz (Professor, University of Fribourg) opened the webinar by welcoming the speakers and attendees, while also highlighting the collaborative synergies between ELI and ALI.

The ELI Third Party Funding of Litigation project aims at the development of Principles containing safeguards to provide an environment in which TPLF is allowed but balances the availability of the tool with the interests of claimants and defendants and a healthy litigation market. The Principles may also serve as a ‘check-list’ for courts when regarding the validity of a TPLF agreement as well as providing inspiration for national legislators. See here on the impact that the draft Principles are garnering.

Project Co-Reporter, Sara Cockerill (Judge of the High Court of England and Wales, Judge in Charge of the Commercial Court 2020–2022) discussed the challenges encountered during the research, emphasizing the complexity of TPLF. She noted the absence of a simple solution due to the diverse range of circumstances involved, leading to a recognition of a spectrum of acceptable approaches; ‘there is rather a range of acceptable answers’, she explained. Given the controversial nature of the topic, Judge Cockrill explained that the Reporters opted for a non-restrictive approach in constructing the report, addressing different areas as well as incorporating best practices principles. 

Tom Baker (Professor, University of Pennsylvania Carey Law School; American Law Institute) provided insights on the field from the US perspective. Baker described the current market and regulatory landscape in the country, noting a shift towards portfolio-type funding arrangements and an increase in the monetisation of TPFL. He highlighted a continued erosion of traditional common law objections to TPFL  before adding that the trend of regulation is primarily occurring at court level, with state-level efforts potentially hindering TPFL under the guise of addressing social inflation, such as the promotion of bills to promote disclosure and other measures that at a first glance look good but ultimately make TPFL more expensive or unavailable. Baker further pointed out challenges stemming from the partisan political context in the US, particularly affecting the commercial TPFL market. He discussed a notable lawsuit involving Burford and Sysco, which raised a debate over whether funders should influence settlement strategies. The ELI principles suggest that control can be possible but exceptional. He emphasised the uniqueness of ELI’s approach by stating that ‘there is nothing remotely similar happening to what the ELI is doing’ on the subject, encouraging others to follow suit.

Alice Fremuth-Wolf (Market Head for Austria & CEE region, Nivalion AG), representing the commercial funding perspective, congratulated what she considered a ‘balanced approach’ on the drafting of the Principles which, she said also acknowledgment of the funder’s viewpoint. She argued that the European market has not demonstrated any significant failures in this regard, suggesting that regulation might not be necessary. Among other things, Fremuth-Wolf highlighted the principle of transparency but questioned who should be responsible for protecting whom, particularly considering the high risks borne by funders. In addition, she raised concerns about limitations and caps on funder fees, suggesting that such interference could hinder funding opportunities, especially in high-risk and long-term cases. Drawing on the ‘unattractive example’ of Germany's implementation of collective redress and its imposition of a 10% margin, she suggested that such limitations could deter funding and harm consumers and claim-holders. Fremuth-Wolf further reflected on the principle on capital adequacy (Principle 7) and the disclosure of third-party funding agreements, calling for a sensible approach to the issue of control.

Pia Lindholm (Deputy Head of Unit for Civil Justice, Directorate-General for Justice and Consumers, European Commission) outlined the various legal instruments available within the European Union to address TPFL. She emphasised the political will to closely monitor this issue underlining that the decision on whether legislative action is needed in the EU will be made by the next Commission, following the conclusion of the EU Commission mapping study on the existing European litigation funding landscape. Lindholm noted that while the majority of Member States currently lack regulation on TPLF, it is permitted in some but not all. She considered ELI’s ‘webinar is an excellent opportunity for the European Commission to gather information’ for its work in this area.

Cristina Poncibò (Professor, Università degli Studi di Torino, Department of Law; Contributor to European Parliament’s, Responsibly Private Funding of Litigation: European Added Value Assessment) discussed the benefits and risks associated with TPLF. She highlighted advantages, including increased access to justice, assurance of meritorious claims though due diligence and the enhancement of company risk management. However, Poncibò also addressed potential risks such as a surge in litigation within portfolio cases, inadequacy of TPF capital, conflicts of interest, confidentiality issues and the defendant’s recovery of procedural costs. Additionally, she shared policy recommendations on funders, aligning with the Principles established by ELI.

The co-reporter, Susanne Augenhofer (Professor, Universität Innsbruck; Senior Research Scholar, Yale Law School; Co-Reporter of ELI Project on TPLF) reflected on the Principles, specifically on the disclosure aspect. Among other things, Augenhofer described the representative action system in Europe, in contrast with the class-action system in the US, as well as the funding in consumer law cases.

The presentations were followed by lively discussions.

More information about the project is available here.