A recent report advises against regulating third-party litigation funding unless issues arise.
- The European Law Institute recommended principles over strict regulation for TPLF.
- These principles aim to enhance transparency and fairness in litigation funding.
- Concerns on prescriptive regulation affecting funding availability were raised.
- The report focuses on key content and awareness in funding agreements.
In a comprehensive report by the European Law Institute (ELI), the necessity to regulate third-party litigation funding (TPLF) only arises when specific market failures or identifiable problems are evident. Instead of immediate regulation, the ELI advocates for a set of guiding principles aimed at ensuring transparency, fairness, and accessibility in the TPLF landscape.
The report highlights the importance of key minimum content and full understanding of terms by the funded parties, suggesting this as a more beneficial focus than compulsory regulation.
This finding precedes the long-awaited interim conclusions of the Civil Justice Council’s review on TPLF, initially slated for release over the summer and led by Dame Sara Cockerill, a High Court judge, alongside Austrian academic Professor Susanne Augenhofer, with input from Barrister Joseph Rich of 7KBW.
Among the influential members advising this project were former Lord Chief Justice, Lord Thomas, and Susan Dunn, founder of Harbour Litigation Funding. They, along with others, sought to create a balanced view of TPLF’s merits and challenges.
While acknowledging the limited utility of existing self-regulation, the ELI report notes that such codes are often developed by experienced market participants, potentially leaving less sophisticated users overlooked. A wider regulatory framework, some argue, remains in nascent stages despite growing support.
A crucial concern is that prescriptive regulation could disrupt the risk/reward balance, potentially deterring funders and limiting access to justice. The report warns that increased costs tied to regulation could inhibit the availability of diverse funding solutions that cater to different legal contexts.
The ELI presents its principles as a middle-ground approach, focusing on critical areas to ensure fairness for both funders and funded parties. They insist on the importance of disclosing the existence and details of funding to the parties involved, capital adequacy, and funders’ fees.
These principles include a comprehensive framework of twelve pivotal guidelines, addressing transparency, the funders’ control over proceedings, and dispute resolution within funding agreements.
By proposing a standardised yet flexible framework, the report aims to maintain TPLF as a viable and effective means of supporting access to justice while safeguarding against unfair practices.
The ELI’s measured approach suggests that careful guidance may better serve the TPLF sector than imposition of strict regulations, preserving justice access.
