EU considers regulation of third-party litigation funding

Third-party litigation funding (TPLF), though still uncommon in Poland, has begun to gain ground, with a number of litigation funds already active in the market. Despite this development, there is currently no dedicated regulation at the national level. However, recent moves by European institutions suggest that this may soon change.

TPLF involves an external entity financing legal proceedings in which it has no legal stake, in exchange for a share of the awarded compensation. This arrangement is typically used by specialised litigation funds and aims to support parties lacking the financial means to pursue costly legal action.

According to Olga Gerlich and Marcin Rudnik from the dispute resolution team at Wolf Theiss in Warsaw, litigation funding can enhance access to justice by levelling the playing field in legal disputes. However, it also introduces certain risks, including potential conflicts of interest. Funders may exert influence over litigation strategy or limit the funded party’s ability to settle or withdraw claims.

Concerns have also been raised about the proportion of proceeds funders are entitled to receive and the extent to which these arrangements should be disclosed in proceedings. In some instances, especially in group claims involving small consumer interests, the funder and legal representatives may receive most of the compensation, leaving little benefit for the actual plaintiffs.

These concerns are reflected in a recent report published by the European Commission on 21 March 2025. The report, spanning 700 pages, analyses TPLF regulation across EU Member States and several non-EU jurisdictions. It follows a 2022 European Parliament resolution urging the Commission to investigate responsible litigation funding practices and to consider regulatory measures.

As part of its findings, the Commission included a draft directive outlining potential regulatory approaches. These include licensing and supervision of funders, transparency requirements, limits on funders’ influence, and rules on contract terms. The study also mapped how existing national laws align with the proposed framework.

In most EU countries, including Poland, the only TPLF-related provisions are found in laws implementing the Directive on Representative Actions. In Poland’s case, this includes requirements for disclosing funding agreements and assessing their influence on proceedings—though these measures currently apply only to consumer class actions.

Interviews conducted during the Commission’s research revealed that 58% of stakeholders support some form of regulation, with 29% favouring an EU-wide framework. Only 13% opposed regulation altogether.

The European Commission’s findings indicate a fragmented regulatory environment, which may hinder competition, transparency, and predictability in litigation funding. It remains to be seen how the European legislature will proceed, but further regulatory efforts are expected.

The global TPLF market was valued at USD 17.5 billion in 2024, with Europe accounting for 25% to 30%. Projections suggest the market could grow to over USD 67 billion by 2037.