Based on interviews of all UK based third party litigation funders the paper provides new empirical evidence on the nature, extent and type of third party funding of litigation. It also examines the emergence of new group or class action third party funders in Europe focused primarily on follow-on cartel damage claims. The discussion is then expanded to the broader issues such as the justification for third party funding, its impact and a critical assessment of the arguments against such funding.
Third-party litigation funding (TPLF) is where an investor otherwise unconnected with a legal action finances all or part of a claimant’s legal costs. If the case fails, the funder loses its investment and is not entitled to receive any payment. If the case succeeds, the investor takes an agreed-upon success fee. While not entirely new, the emergence of TPLF has recently been put in the spotlight with the entry of dedicated firms investing in commercial litigation in the U.K., Europe, and further afield. This study aims to shed light on the reality of TPLF. It is based on interviews with the leading dedicated TPLF investors based in the U.K.,1 and dedicated TPLF group action investors in Europe.2 It explores the development and rationale of TPLF in Europe, with a focus on the position in England and Wales,3 and the emerging funding of group actions in Europe.4
Part I of the discussion below provides some background to the development of TPLF in Europe. Part II is an overview of the TPLF funders in England and Wales based on interviews conducted in the second half of 2011. Part III examines group litigation funding in Europe. Part IV discusses the justification for and likely impact of TPLF, together with some of the policy issues. Part V looks at the anecdotal criticisms of TPLF that have been made by U.S. commentators and compares them to hard evidence.