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Op-ed: “EU Parliament Shouldn’t Hand European Justice to the Secretive Litigation Finance Industry”

“The European Parliament faces a crossroads: should it hand over control of the EU’s lawsuit system to an obscure but enormous industry known as third party litigation funding (TPLF)?”, writes Harold Kim, President of the U.S. Chamber of Commerce Institute for Legal Reform, for the Brussels Morning Newspaper.

The European Parliament’s Legal Affairs Committee is currently debating a report that would provide oversight of the growing industry of litigation finance. Third party litigation funders invest in lawsuits in exchange for a share of any settlement or judgement award. 

“TPLF is a fast-growing, multibillion-Euro industry in Europe, yet it is mostly unregulated, unlike any other financial institutions”, writes Kim.  “Funders are also not bound by any of the standards that legal professionals must abide by, such as acting in the best interests of the claimants or paying the legal costs of the case should they lose. Instead, because funders must be paid first from any award or settlement, claimants can be left with little to nothing.”

“The TPLF industry grew by 40% in the EU between 2009 and 2019. According to the European Parliamentary Research Service, it is projected to grow even faster this decade, potentially doubling in size over the next five years.”

Regarding the Parliament’s report, Kim says critical safeguards include prohibiting funders from controlling the course of litigation; disclosing conflicts of interest between funders and lawyers; and holding funders responsible for adverse costs should their side lose the case.

Another critical safeguard in the report would require review of litigation funding agreements and disclosure to all parties in the lawsuit. Kim says “[d]isclosure would bring much-needed transparency to an industry that actively does not want anyone to know what they are doing.”

“This is a once-in-a-lifetime opportunity for the EU to take control of the situation before litigation funding runs rampant. They should take it,” concludes Kim. 

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