European Union Explores Regulation of Third Party Funding and International Arbitration - Litigation Finance Journal

[Gunnar Larson]

Check out my new article:
https://litigationfinancejournal.com/european-union-explores-regulation-of-third-party-funding-and-international-arbitration/


As litigation finance continues to expand worldwide, political factions
look to regulate the sector. New guidance from the European Parliament aims
to foster “responsible private funding of litigation.”

Mondaq
<https://www.mondaq.com/uk/class-actions/1304252/eu-plans-to-regulate-third-party-funding-in-litigation-and-international-arbitration>reports
that the European Union aims to create an independent supervision body to
regulate third party funding activities, creating universal terms and
conditions for litigation finance in Europe.

The overarching premise is that EU funders who sponsor agreements may be on
the hook for adverse effects related to the litigation. The directive also
looks to ensure that litigation investors have enough liquidity available
to support both their enterprise and their litigation finance agreements,
proven on an annual basis. Transparency is central to the EU directive,
along with capping potential litigation funder awards at 40%. If litigation
funders look to meddle in the decision of a case, the directive’s oversight
body may elect to terminate the litigation funding agreement.

The European Commission is debating the incorporation of these rules.
Further scrutiny will be applied by the European Parliament and European
Council. Ultimately, each member state of Europe will need to ratify the
rules before they can be enforced.
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