The Principles are the final outcome of the ELI project on Third Party Funding of Litigation led by Co-Reporters, Dame Sara Cockerill, Judge of the High Court of England and Wales, Judge in Charge of the Commercial Court 2020–2022 and Prof Dr Susanne Augenhofer, Professor, Universität Innsbruck, Senior Research Scholar in Law and Visiting professor, Yale Law School. It was driven by the rapid expansion of the TPFL industry, with projections estimating the market size to surpass US$35 billion by 2035, by one account.
A key issue behind a call for regulation in this field is the transparency deficit and the knowledge imbalance between funders and funded parties, particularly consumers. Consistent concerns across jurisdictions involve information asymmetry and power imbalances during TPFL agreement negotiations. While focused on the principles and practices essential for the European TPFL market, the Principles acknowledge that these issues are not confined to Europe alone and aim for a framework that resonates globally and supports fair litigation funding practices worldwide.
As Co-Reporters explain, ‘there is no doubt that recent years have seen both cause for celebration of Third Party Funding of Litigation as a vital driver of access to justice in a world where state funded legal aid is often not available – but also cause for concerns as to whether the difficult issues which can arise within this structure are always being fairly handled. ELI’s project was started with the view that it was necessary to provide an objective and balanced view of the competing considerations, and that need has only become more acute as the debate has progressed, with the subject being actively considered in multiple jurisdictions - most notably of course in the EU. What we have been able to produce is something which has moved beyond an evaluation of the two sets of arguments, but has looked to how, in practical terms safeguards can be put in place without stifling the beneficial use of funding. Our output – a set of Principles supported by suggested minimum content for Third Party Litigation Funding agreements and consideration of the slightly different approaches which may be needed in particular contexts and areas has been arrived at with the benefit of consultation with both sides of the debate, including discussions with a wide and highly expert Advisory Committee. Ultimately we have concluded that the best focus is on ensuring key minimum content and full visibility and understanding of terms on the part of the funded party. We very much hope that the Report will provide a valuable contribution to the consideration of the issues in the future.’
Four core objectives for effective TPFL – facilitating access to justice, addressing valid TPFL concerns, levelling the international playing field, and informing regulatory or legislative responses – offered guidance in the drafting of the resulting core Principles which cover Promotional Materials, Transparency, Avoidance and Management of Conflicts of Interest, Capital Adequacy of Funders, Funders’ Fees, Confidentiality, Case Management (Control), Termination of Third Party Funding Agreements, and Dispute Resolution and Review by Courts or other Authorities. These Principles are accompanied by general provisions (covering subject matter and purpose, scope and definitions) as well as an appendix on the recommended minimum content required in TPLF agreements. The Principles also provide insights into specific types of proceedings, namely consumer litigation, insolvency proceedings, arbitration, and crowdfunding of litigation. They further explore related concepts like Damages Based Agreements (DBAs) and Conditional Fee Agreements (CFAs), where the legal representative's remuneration depends on the litigation's outcome, as well as insurance.
The full Draft ELI Principles, providing a value framework that can be applied globally, resonating with international norms and initiatives beyond Europe, are available here. The edited and layouted version will be soon available on the ELI website.
More information about the project can be found here. A series of webinars on the Report will take place shortly. Further information, including registration, is available here.
The project’s Co-Reporters are available for questions. For more information and press inquiries, kindly contact the ELI Secretariat (secretariat@europeanlawinstitute.eu).
