EJF position on Third Party Litigation Funding (TPLF)

EJF is pleased to share its position paper regarding the legislative own initiative report of MEP Axel Voss on Responsible Private Funding of Litigation. EJF outlined points are of crucial importance to achieve an effective and coherent legal architecture that safeguards against potential abuses of TPLF. This is because while collective redress mechanisms and TPLF are meant to have a positive impact for consumers in facilitating the access to justice, there is the risk – if no sufficient safeguards are put in place – that private funders’ interests (especially their interest in commercial profit) may be disconnected from – or even opposed to – consumers’ interests. Concrete examples can be seen in the US or in Australia. In Europe we are seeing an increase in cases.

Some of the safeguards we call for include:

• An adequate institutional supervision of financial markets regulation;
• Independent public supervision of TPLF activity in representative actions;
• A need for more scrutiny and transparency over funding agreements;
• Stricter limitation when it comes to the compensation funders could receive.
• A reinforced “loser pays principle” and the possibility of pay-out only via public infrastructures.

The European Parliament Rapporteur of the report is still analysing the amendments to the first draft and we expect a revised text in Q1 2022. Following this review phase, a JURI Committee vote on the report can be expected.

The European Justice Forum is looking forward to fruitful conversations with stakeholders during this phase, to ensure that additional effective safeguards against the abuse of TPLF be considered. With these points, EJF calls on the European Parliament to support and approve this report in plenary, and on the European Commission to take up the Parliament’s proposal by submitting a proposal for a Directive to regulate third party litigation funding.