Third-Party Litigation Funding (TPLF) in France

Introduction

With Art. 16 of the law no 2025-391 of 30 April 2025 (“Law”) transposing various provisions of EU law[1], Third-Party Litigation Funders are for the first time recognized in French law as a potential economic actor, without any further guard-rails for their operation as financial service companies. The Federation of French Insurers (France Assureurs) had defined various issues to be considered and solved in respect of admitting such new financial offers to the French market for legal services in order to avoid the commodification of justice[2], just as Insurance Europe raised its voice in January 2026[3], also together with a broad cross-sectional business group including EJF[4]. In a detailed and innovative way, EJF had defined, in 2025, an ideal framework against which to check upcoming regulation of litigation funding[5] which will be considered here in evaluating the new Decree.

Description of the Decree

The 3 pages Decree comprises 11 articles and is part of the transposition of the Representative Actions Directive (RAD).  It is based on the law mentioned above and effective from 01 January 2026.  It can be modified by a Decree of the Conseil d’État.

The Minister in charge of consumer affairs will define the details to be submitted for an application for the admission as Qualified Entity (Art. 1 IV).  Applications will be submitted to the Director in charge of competition, consumer affairs and combat of fraud (Art. 1 I).  Admissions will only be valid for 5 years and can be renewed repeatedly (Art. 2).

Qualified Entities will annually report about their activities as to be specified by ministerial order (Art. 4). The admission can be withdrawn for non-compliance with the defined preconditions by application from the European Commission or another Member State (Art. 5).

Art. 7:  Latest on the day of introducing a group action, the Qualified Entity will inform the public, in particular on its internet site, about:

1.     The list of

-        those third parties from whom it has received funding (with the exception of money provided by unions from regular contributions of their members), be it in the form of money or in kind, including the provision of goods, services or personnel,

-        which ones have made the 10 largest contributions during the previous calendar year, AND

-        of those who during the latest 12 consecutive months have provided more than 5% of its annual resources or which exceed € 20,000.

The list needs to specify

a)     where the funder is a legal person, whether it is based in the EU or not, its company name, address of legal seat and its unique identifier number (RCS = Registre du commerce et des sociétés = number in the company register, or equivalent);

b)     where it is a natural person, his or her name, first name and profession;

c)     the amount or the monetary valuation of the funding received.

2.     The third-party funding contracts on the list mentioned in Art. 7 paragraph 1 need to be described by their essential characteristics, in particular their duration, nature of contribution as gift or loan, including the potential remuneration for the third party, as well as the respective main obligations of the parties to the contract.

These details need to be updated annually for the duration of the action in court.

Evaluation: Pros and Cons

Based on EJF’s previous positions asking for better regulation of TPLF than it has been foreseen in the Representative Actions Directive itself, the following evaluation of the decree can be drawn against the background of the French implementation of RAD’s specifications into French rules of procedure which require brief mentioning for proper contextualization, respectively:

Pros:

·       Comprehensive approach: The Decree refers to all collective actions and thus ensures that only bodies admitted to introducing collective actions can make use of litigation funding and that termination of one collective action excludes any other collective action in the same matter (Art. 16 IX. D. Law).  The admission requires that the body itself does not pursue any intention to make profits (Art. 16 X. B. 3 Law).

·       The Decree ensures in its Art. 7 no. 1 with its lit. a) – c) that transparency is created with respect to the concerns regarding external interference and manipulation[6] as to the identity of the organisations that are funding mass claims with major contributions, while requesting at least disclosure of the contract’s duration, potential remuneration for the third party, and the main obligations of the parties to the contract.

·       The authority admitting claimant bodies is the Director in charge of competition, able to supervise the market.

·       Where the body sues for stopping an infringing behaviour, the usual tool of French law for the enforcement of such duties is applied, i.e. penalty payments which increase proportionally with the time that duty is still not fulfilled («astreinte»).  When the court decides that and to which tenor the amount reached really needs to be paid, such payment will not go into the state budget but into a fund for the financing of future collective actions still to be set up (Art. 16 II. al. 2 phrase 2: «Astreinte liquidée au profit d’un fonds consacré au financement des actions de groupe»).

·       This fund will also be fed by civil sanctions which a court can order by request of a public authority in case of willful serial damage inflicted by a trader (modification of Art. 1254 Code Civil); it is impossible to take out insurance against this sanction which needs to be proportionate to the gravity of the infringement and the profit the trader has made – for a natural person that sanction can only rise up to twice the profit made, for a legal entity up to five times the profit made.  If it coincides with a sanction of administrative or criminal law, the highest of the respective limits applies to the accumulated amount of all sanctions (Art. 16 XI. Law).

·       Art. 16 X. B. 5: Funders are not allowed to exert any kind of influence on the action which is supposed to avoid that the inherent conflict between claimant and beneficiary interests can have any effect on the action. This of course can only be seen by full disclosure of the funding contract (see below).

Cons:

•        Transparency and disclosure: The Decree does not request full disclosure from all funders’ identities and of the ultimate sources of money invested, and it does NOT request disclosure of the full, unredacted text of the TPLF agreements to the court, nor a redacted version to the defendant. Here, it is a missed opportunity to not take advantage of the fact that the Director of competition is already involved:  Austria has given its Federal Cartel Prosecutor the right to obtain the full unredacted text of litigation funding agreements[7] (LFAs) which is a very elegant solution to enable a neutral authority to review the legality of such agreements and inform the court in case of recognizable indirect ways the LFA offers to influence the action against the prohibition to do so (see above).

•        No registration and oversight foreseen requiring authorization, registration, and supervision of litigation funders, as it is the case with all other business fields in the financial sector that have their own appropriate rules and as the respective EP resolution initiated by Axel VOSS had asked for[8].

•        No cost liability as a joint liability for adverse costs and no capital adequacy minimum standards to prevent abuses.

•        No claimant-first recovery and no caps on fees by ensuring minimum pay-out.

Summing up, the new French Decree goes a long way into fulfilling objectives EJF had supported over many years.  This comes on top of a few more positive observations on the French system of collective conflict solution which came out along the lines of recommendations issued earlier by EJF:  collective actions go to Special courts (Art 16 VI Law), actions for compensation of cartel damages are only possible after a final judgement by the specialized cartel court, and are only possible for the 5 years following that judgment’s finality (Art. 16 VIII Law).  And: nobody can waive his right to a collective action by contract (Art. 16 IV. F. Law); such contractual waivers had effectively limited the use of collective actions in the U.S., where  – seen through a European lens –  more targeted measures would have been more suitable to quench the observed US excesses.

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[1] The Art. 16 referred to in this law comprises 7 of the full law’s total number of pages - https://www.legifrance.gouv.fr/jorf/article_jo/JORFARTI000051539065 .
[2] Note dated 30 April 2025, on file with the author.
[3] Insurance Europe key messages on Third-Party Litigation Funding (TPLF) – https://www.insuranceeurope.eu/publications/3493/insurance-europe-key-messages-on-third-party-litigation-funding-tplf/?inline=1 .
[4] https://www.insuranceeurope.eu/news/3491/insurance-europe-co-signs-cross-sector-call-for-eu-action-on-third-party-litigation-funding-tplf  – Joint statement at https://www.insuranceeurope.eu/publications/3490/joint-statement-call-for-proportionate-eu-level-action-on-professional-third-party-litigation-funding/?inline=1 .
[5] Third-Party Litigation Funding in Search of Competition, in: IWRZ – German Journal for International Business Law 3/2025 (Part 1), p. 112-119 and 4/2025 (Part 2), p 174-180 (Herbert Woopen).
[6] Bloomberg Law: China Firm Funds US Suits Amid Push to Disclose Foreign Ties .
[7] See Woopen, note 5 above, p. 114.
[8] European Parliament resolution of 13 September 2022 with recommendations to the Commission on responsible private funding of litigation (2020/2130(INL)).

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