EU Plans To Regulate Third-Party Funding In Litigation And International Arbitration

On 13^th September 2022, the EU Parliament voted to approve a resolution proposing a directive (the "Directive") on the regulation of third-party funding entitled "Responsible private funding of litigation". If adopted in its current state, the proposal would regulate Third-Party Funders ("TPFs") funding proceedings in the European Union.

What is third-party funding?

Third-party funding involves a non-party, typically a private commercial fund with no prior connection to a dispute, agreeing to finance all or part of the costs of the proceedings in exchange for an agreed share of any damages awarded (and/or a multiplier of costs paid) in the event of a successful outcome.

The Directive incorporates a very broad definition of a third-party funder (TPF) as ''any commercial undertaking that enters into a third-party funding agreement¹ in relation to proceedings [...] and which has the primary aim of receiving a return on an investment it makes by providing funding