Trending Now
Commercial Regulatory Issues

International Legal Finance Association (ILFA) Welcomes New ELI Report – ‘Principles Governing the Third-Party Funding of Litigation’

The International Legal Finance Association (ILFA), the global voice of commercial legal finance, has welcomed the findings of the newly published European Law Institute (ELI) report ‘Principles governing the third-party funding of litigation’. 

The report, authored by UK High Court Judge Dame Sarah Cockerill and Professor Susanne Augenhofer, is the product of more than two years of investigative work to develop principles and guidance for the TPLF market, and represents a new, independent contribution to the legitimate and effective use of TPLF. 

Following the publication of the report, Neil Purslow, Chairman of the Executive Committee of ILFA, commented:

‘This new report, authored by seasoned legal observers, recognises that commercial legal finance increases access to justice for European businesses and consumers and provides ‘vital improvement in access to justice’ (pg.19) when made available. Contrary to the repeated claims of big business, funding helps level the playing field for those exercising their rights against multinationals with almost unlimited resources’. 

The report also cautions against imposing new regulations on the TPLF market. Instead, it advances a ‘complementary approach’ involving guidance to funders on issues to be taken into account before entering into a TPLF agreement, together with publishing a new Appendix drawing together the recommended minimum content of a funding agreement.

Purslow commented: 

‘ILFA agrees with the report’s conclusion that proscriptive one-size-fits-all regulation isn’t appropriate for a sector like ours. It risks funders ceasing to offer funding, inevitably leading to what the authors rightly identify as ‘serious access to justice issues’.’

The full report from ELI can be read online here. 

About ILFA

The International Legal Finance Association (ILFA) represents the global commercial legal finance community, and its mission is to engage, educate and influence legislative, regulatory and judicial landscapes as the global voice of the commercial legal finance industry. It is the only global association of commercial legal finance companies and is an independent, non-profit trade association promoting the highest standards of operation and service for the commercial legal finance sector. ILFA has local chapter representation around the world. For more information, visit www.ilfa.com and like us on LinkedIn and X @ILFA_Official. 

About ELI 

The European Law Institute (ELI) is an independent non-profit organisation established to initiate, conduct and facilitate research, make recommendations and provide practical guidance in the field of European legal development. The ELI secretariat is hosted by the University of Vienna, Austria.

The report team was led by Susanne Augenhofer (Professor of Law, Austria), Dame Sara Cockerill (High Court Judge, UK), and Henrik Rothe (Professor of Law, Denmark) (until July 2022). 

Commercial

View All
Commercial Regulatory Issues

Funders Assess Challenges and Opportunities in 2025

By Harry Moran |

Leading funders in the US and UK have been asked to identify the challenges that they are facing, as well as the opportunities they are looking towards in 2025. Respondents included senior executives at Omni Bridgeway, Therium, Parabellum Capital, Harbour Litigation Funding, Balance Legal Capital, Burford Capital, and Bench Walk Advisors.

An article in Legal Business explains that the continued calls for tighter regulation and oversight of litigation finance were top of mind for many of the funders interviewed. This was particularly highlighted in the United States, where opposition to third-party funding was characterized by Therium’s Neil Purslow as “a hostile approach to the industry from US corporates”. Matthew Harrison of Omni Bridgeway and Dai Wai Chin Feman from Parabellum were both clear in saying that the actual regulators are not inherently adversarial towards funders, with Feman stating that “there is a lot of noise but there is always noise” from those who would seek to restrict third-party funding.

Meanwhile, UK funders are growing increasingly frustrated with the new government’s gradual approach to resolving the impact of the Supreme Court’s PACCAR decision, as the industry must now wait until the completion of the Civil Justice Council’s report next year. Purslow lamented the government’s inaction and pointed towards the previous parliament’s Litigation Funding Agreements (Enforceability) Bill as the obvious solution, arguing that “there was a fix available and it could and should be done”. Oliver Hayes from Balance Legal Capital similarly described the current situation as “undesirable”, but expressed hope that “the government provides a fix which clarifies the position and resolves the questionable challenges being run by defendants around the legality of funding agreements.”

Looking ahead to the opportunities open to funders, Omni Bridgeway’s Harrison suggested that the perception of funding has shifted away from only being a solution for ‘David versus Goliath’ situations, as “many CFOs, GCs, and big firms understand that litigation finance is a very valuable risk and cost mitigation tool.” As funders continue to look to diversify their investments, Mark King at Harbour noted that in the UK, “we are seeing an increased interest in credit finance facilities with law firms”.

Commercial Regulatory Issues

CJEU Judgment Prohibits Outside Investment in Law Firms

By Harry Moran |

A recent judgment from the Court of Justice of the European Union (CJEU) ruled that EU member states can block law firms from accepting external investment in order to protect lawyers’ independence and comply with their professional obligations. The court found that EU directives governing the freedom of establishment and free movement of capital, “must be interpreted as not precluding national legislation” that prohibits third-party ownership of law firms.

Reporting in Legal Futures explains that the ruling arose following preliminary questions submitted by a German court which was overseeing a dispute between law firm Halmer Rechtsanwaltsgesellschaft and the Rechtsanwaltskammer München (Munich Bar Association). Halmer had informed the Munich Bar Association that it had sold 51 of its 100 shares to an Austrian company called SIVE Beratung und Beteiligung GmbH (SIVE). The bar association responded by informing HR that the transfer of shares was prohibited under the German Federal Lawyers’ Code, and subsequently revoked Halmer’s registration with the bar association. 

The Court of Justice’s ruling on these questions found that it was permissible for member states to block this kind of outside investment, noting that “economic considerations focused on a purely financial investor’s short-term profit could prevail over considerations guided exclusively by the defence of the interests of the law firm’s clients.” André Haug, vice-president of Germany’s Federal Bar Association, welcomed the European court’s decision and highlighted that its ruling concurred with the German government’s position that “the ban on third-party ownership is justified in order to guarantee the independence of lawyers.”

The case that came before the court was of sufficient significance that it attracted attention from member states across the continent, with observations submitted on behalf of the German, Spanish, French, Croatian, Austrian and Slovenian Governments.

The CJEU’s full judgment can be found here.

Case Developments Commercial

CAT Rules in Favour of BT in Harbour-Funded Claim Valued at £1.3bn

By Harry Moran |

As LFJ reported yesterday, funders and law firms alike are looking to the Competition Appeal Tribunal (CAT) as one of the most influential factors for the future of the UK litigation market in 2025 and beyond. A judgment released by the CAT yesterday that found in favour of Britain’s largest telecommunications business may provide a warning to industry leaders of the uncertainty around funding these high value collective proceedings.

An article in The Global Legal Post provides an overview of the judgment handed down by the CAT in Justin Le Patourel v BT Group PLC, as the Tribunal dismissed the claim against the telecoms company following the trial in March of this year. The opt-out claim valued at around £1.3 billion, was first brought before the Tribunal in 2021 and sought compensation for BT customers who had allegedly been overcharged for landline services from October 2015.

In the executive summary of the judgment, the CAT found “that just because a price is excessive does not mean that it was also unfair”, with the Tribunal concluding that “there was no abuse of dominant position” by BT.

The proceedings which were led by class representative Justin Le Patourel, founder of Collective Action on Land Lines (CALL), were financed with Harbour Litigation Funding. When the application for a Collective Proceedings Order (CPO) was granted in 2021, Harbour highlighted the claim as having originally been worth up to £600 million with the potential for customers to receive up to £500 if the case had been successful.

In a statement, Le Patourel said that he was “disappointed that it [the CAT] did not agree that these prices were unfair”, but said that they would now consider “whether the next step will be an appeal to the Court of Appeal to challenge this verdict”. The claimants have been represented by Mishcon de Reya in the case.

Commenting on the impact of the judgment, Tim West, disputes partner at Ashurst, said that it could have a “dampening effect, at least in the short term, on the availability of capital to fund the more novel or unusual claims in the CAT moving forward”. Similarly, Mohsin Patel, director and co-founder of Factor Risk Management, described the outcome as “a bitter pill to swallow” for both the claimants and for the law firm and funder who backed the case.

The CAT’s full judgment and executive summary can be accessed on the Tribunal’s website.