BRAK President Ulrich Wessels and Sam Townend KC, Vice Chair of the Bar, jointly hosted the proceedings, generously held in the UK Ambassador to the EU’s residence in Brussels. We were delighted to welcome attendees including local Bar leaders, representatives of other EU national bars, the Council of Europe’s Ambassador to the EU, and a cast of legal professionals from private practice, the EU institutions, and stakeholder bodies such as the Council of the Bars and Law Societies of Europe and the European Law Institute. Celina Colquhoun, Co-Chair of the Bar’s European Committee, was also present.
Proceedings were kicked off by Axel Voss MEP, who held the pen on the resolution adopted by the European Parliament in September 2022, calling on the Commission to legislate to ensure responsible private funding of litigation in the EU. Mr Voss then joined the rest of the stellar panel, comprising Andreas Stein, Head of the Civil Justice Unit in the Commission’s Directorate General for Justice and Consumers; André Haug, Vice-President of the BRAK and a practising lawyer in Germany; Simon Latham, of London-based third-party funder, Augusta Ventures; all elegantly moderated by Sam Townend KC.
A number of themes emerged from the discussions:
- At a time of dwindling state resourcing of access to justice, TPF is widely recognised as an important source of funding for meritorious cases that otherwise might never be brought, most commonly in collective redress actions, in group competition claims and the like.
- At present however, TPF is largely unregulated. This can open the door to abuse of the system, such as excessive profit-taking, funders taking control of litigation or settlement negotiations, or even withdrawing funding mid-litigation.
- In countries such as the UK, where TPF is rather better established, the industry is self-regulated on a voluntary basis by bodies such as the Association of Litigation Funders. However, it may be that neither their voluntary nature, nor the penalties imposed for breach of their codes of conduct, are sufficient to punish or deter the abuses mentioned.
- The European Parliament’s suggested approach is to set minimum standards across the EU to try to avoid these pitfalls while maintaining the benefits of increased access to justice. Key features would include: an authorisation system for third-party funders; minimum standards in terms of independence, transparency, governance and capital adequacy; a fiduciary duty of care to act in the best interests of a claimant; rules to prevent funders having undue control over the legal proceedings they fund and requiring them to demonstrate sufficient own funds to meet their commitment; a ban on abandoning funded parties in litigation; and a cap on the percentage of the gross settlement or damages payable to TPFs of 25-40%.
- The Commission reiterated its commitment to act upon the Parliament’s request but stressed that it would take time to do so. We were told that it would initiate an independent mapping study in the autumn. Everyone present was encouraged to provide input on the topic.
- To balance these concerns, we were reminded that much of the litigation so funded is of very high value, with claimants who are sophisticated consumers of legal services, and not the vulnerable weaker party generally protected by consumer legislation. The risks run by TPFs in fronting such claims can be high, with lengthy delays between fronting the funding and an eventual successful claim, if indeed it is successful. Thus, for example, imposing too low a cap on the percentage of the award a TPF might claim reduces the opportunity for TPFs to recoup some of the losses consequent on those risks, and could reduce the number of TPFs in the market willing to provide the funding, with consequent curbing of access to justice.
- Overall, there was clear support for TPF but also common consensus on the need for it to be regulated, and to support the Commission as it carefully considers how best to achieve this, with the benefit of the Parliament’s suggestions to call on.
Reflecting on the discussion, Sam Townend KC said: “From the Bar Council’s perspective, the means for claimants to pay to assert their rights is a perennial problem we have long been grappling with, given that, sadly, legal aid is all but unavailable. TPF, managed carefully, can be a small part of the answer.
“England and Wales already has a developed market, unlike much of Europe. However, it is important to keep a watching brief to check how developments in the EU might affect funding for litigation here in England and Wales. We do not want a ‘race to the bottom’ nor to be unnecessarily restrictive.”
“It was excellent to have this first joint event with the German Bar post-Brexit to explore what are shared opportunities and challenges.”
Evanna Fruithof is the Consultant Director of the Bar Council’s Brussels Office.