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Move Over Carnival: Litigation Funding in Brazil is Heating Up!

Move Over Carnival: Litigation Funding in Brazil is Heating Up!

Writing for Vannin’s Funding in Focus series, Carolina Ramirez, Managing Director in Vannin’s newly-formed New York office, describes the litigation funding climate in South America’s largest and most populous nation. Ramirez highlights both the perceptions and practical applications of litigation finance in Brazil, as well as the regulatory climate and challenges facing industry growth in the region.
Although third party funding arrived on the Brazilian scene only recently, the practice has been warmly embraced relative to other Latin American markets. That has to do with Brazil’s liquidity crisis following the Great Recession, in addition to fallout in the aftermath of Operation Car Wash, or Operação Lava Jato, and the subsequent reliance on arbitration as a result. According to Ramirez, Brazilians maintain a perception that litigation funding is utilized solely by impecunious claimants, or those facing liquidity constraints. Although perceptions are gradually changing, she points to one local practitioner who claims that “case law on the matter is scarce and major Brazilian arbitration chambers do not publish their precedents, so parties (be it funders, funded parties or adversaries to a funded party) still have to deal with a reasonable (and potentially damaging) degree of uncertainty.” Yet despite the uncertainty, the benefits of litigation funding are widely being recognized, with one practitioner going so far as to state that the practice “will evolve to [allow] major companies seeking reasonable financing that allows them to pursue their core business objectives while conducting high level litigation.” Such is the reality of litigation funding in other major jurisdictions, so why not Brazil? Major obstacles to the adoption of litigation funding have to do with costs and time constraints — the former containing too few, and the latter containing far too many. The cost of filing a claim (appeal included) in Brazil is extraordinarily low, which of course precludes firms from seeking external funding. Additionally, cases can go through many layers of appeal before reaching conclusion, which means that funders can’t accurately predict the timing of their expected recovery. Essentially, the barriers to justice that exist in Brazil work against litigation funders, whereas the barriers that exist in the United States, for example (those being high upfront costs and balance sheet exposure), directly play into a litigation funder’s hands. According to Ramirez, by and large, third party funding is unregulated in Brazil. “Only recently did the Brazil-Canada Chamber of Commerce (“CAM/CCBC”) – one of the most renowned institutions in Brazil – issue a resolution specifically recommending that parties disclose the use of funding at the outset of an arbitration (Administrative Resolution 18/2016).” Practitioners on the ground believe in the likelihood that other arbitral institutions will at some point promulgate further regulations on third party funding in Brazil, though at present, the industry remains unregulated. So is Brazil on the precipice of future growth in the area of litigation funding? Ramirez seems to think so. “The resounding message,” she writes, “is that Brazil is ripe for third party funding and that the time to enter the market is now. It is also clear that practitioners are enthusiastic about the prospect of having foreign third party funders with significant experience enter the market and level the playing field which has thus far been dominated by a single local Brazilian third party funder.” To read Ramirez’s article in its entirety, please visit this link
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WilmerHale Critiques VC-Style Patent Funding for Misaligned Incentives

By John Freund |

In a provocative new white paper, WilmerHale attorneys argue that venture capital–style strategies applied to patent litigation funding are fueling a wave of meritless lawsuits and stifling innovation in the U.S. tech economy.

An article in JD Supra outlines the firm's concerns about how litigation funders increasingly adopt a venture capital mindset when backing large portfolios of patent suits with the expectation that one or two major wins will offset the losses.

The paper contends that this model encourages the pursuit of weak or overbroad claims by non-practicing entities (NPEs), often through shell companies that obscure the funders' identities and incentives. In one example cited, a single defendant was forced to defend against dozens of claims, most of which were later dropped or invalidated, resulting in significant financial and operational burdens.

The authors also raise national security concerns, pointing to the lack of transparency around foreign investors that may leverage U.S. litigation as a strategic tool. In response, WilmerHale recommends mandating up-front disclosure of litigation funders, expanding fee-shifting mechanisms under laws such as 35 U.S.C. § 285, and amending the Federal Rules of Civil Procedure to improve accountability.

These calls for reform arrive at a moment of increased scrutiny on third-party litigation finance, particularly in the intellectual property space. With transparency and disclosure at the center of WilmerHale’s proposed solutions, the paper adds to a growing chorus of voices calling for more regulatory oversight in the litigation finance ecosystem.

ILFA Welcomes Commissioner McGrath’s Rejection of EU Regulation for Third-Party Litigation Funding

By John Freund |

On 18 November 2025, European Commissioner for Justice Michael McGrath closed the final meeting of the EU’s High-Level Forum on Justice for Growth with a clear statement that the Commission does not plan new legislation on Third Party Litigation Funding (TPLF). 

He added that Forum participants also indicated that there is no need to further regulate third-party litigation funding.

Instead, Commissioner McGrath said the Commission will prioritise monitoring the implementation of the Representative Actions Directive (RAD) over any new legislative proposals. 

(video from 2.32 here). 

Paul Kong, Executive Director of the International Legal Finance Association (ILFA), said:  “We’re delighted to see Commissioner McGrath’s clear statement that EU regulation for third-party litigation funding is not planned. This appears to close any talk of the need for new regulation, which was completely without evidence and created considerable uncertainty for the sector.

Over several years, ILFA has consistently made the case that litigation funding plays a critical role in ensuring European businesses and consumers can access justice without financial limitations and are not disadvantaged against larger and financially stronger defendants. New legislation would have choked off the availability of financial support to level the playing field for claimants. 

We will continue to work closely with the Commission to share the experiences of our members on the implementation of the RAD across the EU, ensuring it also works for claimants in consumer group actions facing defendants with deep pockets.”

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 or @ILFA_Official. 

About the High-Level Forum on Justice for Growth

European Commissioner for Justice Michael McGrath launched the High-Level Forum on Justice for Growth in March 2025 to bring together legal industry experts to “focus on and discuss together how justice policies can contribute to – and further support – European competitiveness and growth”. The final meeting of the Forum took place on 18 November 2025, in Brussels. 

Litigation-Funding Investment Market to Hit USD 53.6B by 2032

By John Freund |

A new report projects that the global litigation-funding investment market will reach approximately USD 53.6 billion by 2032, growing at a compound annual growth rate (CAGR) of about 13.84 percent. This robust growth forecast is driven by increasing demand for third-party financing in commercial litigation, arbitration, and high-stakes legal disputes. Investors are seeking exposure to legal-asset strategies as an uncorrelated return stream, while funders are scaling up to handle more complex, higher-value outcomes.

According to the article in Yahoo News, the market’s expansion is fueled by several structural shifts: more claimants are accessing capital through non-traditional financing models, law firms are leaning more on outside capital to manage cost and risk, and funders are expanding their product offerings beyond single-case funding. While the base market size was not specified in the summary, earlier industry data suggests significant growth from previous levels, with the current projection indicating a several-fold increase.

Still, the path forward is not without challenges. Macroeconomic factors, regulatory ambiguity, and constraints within the legal services ecosystem could affect the pace and scale of growth. Funders will need to maintain disciplined underwriting standards and carefully manage portfolio risks—especially as the sector becomes increasingly mainstream and competitive.

For the legal funding industry, this forecast reinforces the asset class's ongoing maturation. It signals a shift toward greater institutionalization and scale, with potential implications for pricing, transparency, and regulatory scrutiny. Whether funders can balance growth with rigor will be central to the market’s trajectory over the coming decade.