The report seeks to address a new business model, whereby commercial actors such as hedge funds heavily invest in legal proceedings and often make enormous profits on the back of the claimant.
On 13 September 2022, our legislative own-initiative report (INL) on 'Responsible private funding of litigation' was adopted by the European Parliament with a clear cross-party majority of + 504 / o 65 / - 57 votes.
With this vote, parliamentarians sent a strong political signal towards the European Commission to counteract the rapidly expanding global trend of hedge funds investing in legal proceedings in order to make enormous profits on the back of ordinary people that seek justice after suffering wrong.
While acknowledging the positive sides of third party litigation funding (TPLF), the European Parliament proposes a series of safeguards that would put an effective stop to those hedge funds activities that are clearly against the interests of claimants. Three examples:
We suggest to put caps on certain astronomical and unjustified rewards of litigation funders;
We want to introduce an authorization system by supervisory authorities supported by courts;
We want to disclose the involvement of funders and make their activities more transparent.
The proposed regulatory regime strengthens the existing structures by adding additional mechanism in order to better protect claimants. We are convinces that the EU must guarantee that its justice system continues to serve the people and is not exploited by profit seeking actors.
Now, the European Parliament is eager to hear from the European Commission and to assess their upcoming legal act, in full alignment with Ursula von der Leyen's 2019 commitment on the European Parliament's right of initiative.
"When this House, acting by majority of its Members, adopts Resolutions requesting the Commission to submit legislative proposals, I commit to responding with a legislative act in full respect of the proportionality, subsidiarity, and better law-making principles"
Download the full report as well as our #TPLF factsheet: