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In March 2025 the European Commission, in association with the British Institute of International and Comparative Law, published an analysis on the legal frameworks and practices of third-party litigation funding (TPLF) in all EU Member States and in some selected countries (the U.S., Canada, Switzerland and the UK).1 The main purpose was to build a first comparative study for assessing future regulatory options, including a draft EU Directive.
TPLF occurs when a funder, unconnected to a legal dispute, provides resources (usually to the claimant) to cover litigation costs in exchange for a share of any award. TPLF gained momentum particularly in the 1990s, primarily in Australia, spread to the U.S. and UK, and is now present in most (but not all) EU Member States. EU Directive no. 2020/18282 (Representative Actions Directive [RAD]) on representative actions for consumer protection allows Member States to decide whether to permit TPLF. If allowed, they must ensure transparency, prevent conflicts of interest, and protect consumers’ interests. Enforcement mechanisms are required for non‑compliance.
Most EU Member States allow TPLF, mostly with little or no specific regulation. Exceptions are provisions implementing the RAD for consumer collective redress.
Non‑EU countries such as the UK and Canada rely on common law and self-regulation. The U.S. has a patchwork of state and federal rules. Switzerland has no specific regulation but, in general, allows TPLF. Where no TPLF-specific legislation exists, TPLF operates under general contract law, civil procedure, and consumer law. Lawyers are bound by professional ethics, including conflict of interest and confidentiality.
TPLF is used in a wide range of legal areas: commercial, civil, competition / antitrust, consumer protection, intellectual property, insolvency, and mass claims.
Most litigation funders are private entities, often operating across multiple jurisdictions. There is no official registry, and the market is considered opaque.
Funders’ compensation is most often 20% to 30% of the award but can be higher or structured as a multiple of costs. Funders often require consent for settlement, choice of lawyer, and strategy, but the degree of control varies.
Among EU members, the Netherlands and Germany are the most developed and active TPLF markets, hosting most funders and pioneering regulatory discussion and litigation funding innovation. Italy is a small but growing market.
Due to the significant presence of international holding companies and an efficient class action settlement framework, the Netherlands has been considered a preferred venue for litigating and settling anti-cartel cases, class actions and, more recently, international debt restructurings involving mass claims.
In recent years some frontier law firms invested significant amounts of time investigating potential claims to present them to funders and claimants’ representative organizations. However, it is hard to determine the potential market size for litigation funding in general, as no data is publicly available.
TPLF is legal and well-established but largely unregulated in Germany. Funders can finance lawsuits in exchange for a share of any proceeds, and the practice is widely used in commercial litigation, mass claims, and arbitration. There is no specific national law regulating TPLF, but German courts generally view funding arrangements positively, treating them as valid contracts. Lawyers are restricted from contingency fee agreements, but funders are not.
Italy is a small but growing market for TPLF. In the Italian system, similar to the German market, the so‑called “patto di quota lite” (when the lawyer’s fee is calculated as a percentage of the result obtained) was initially prohibited by Article 2233 of the Italian Civil Code to protect the independence of the professional, then liberalized in 2006 with the Bersani decree, and restricted again in 2012. The Supreme Court and the case law require precise control over the fairness of the agreed percentages. Therefore, lawyers are not allowed to take a portion of the result obtained, but funders are.
As mentioned above, the Italian TPLF sector remains in an early developmental phase compared to more mature markets such as Germany and the Netherlands, but is showing gradual growth and attracting increased attention from international and domestic funders, legal professionals, and scholars. Only a handful of funders are operating, including domestic startups (e.g. Lex-Capital and BE‑Cause) and branches of large international companies (e.g. OmniBridge, Deminor, and Libra Claims).
There is no specific legislation exclusively governing TPLF in Italy. Instead, it is managed under general contract law (Article 1322 of the Civil Code). Certain funders registered as investment funds (e.g. SICAV) fall under financial regulation by Consob and the Bank of Italy, but most operate without distinct regulatory oversight.
Assignment of claims and rights is permitted, with recent court decisions affirming the ability of consumers to assign rights for compensation in cases such as flight delays. Overall, while the Italian TPLF market is currently small, fragmented, and lacks a specific legal framework, demand and opportunity are both increasing, especially for larger, high-stakes litigation and collective actions.
Recent or pending legislation, mainly for consumer collective actions.
Irish law currently prohibits TPLF by outside parties who have no legitimate and independent interest in the dispute. This prohibition is based on the ancient common law offences of maintenance (funding litigation in which the funder has no interest) and champerty (funding litigation in exchange for a share of the proceeds). The Irish Law Reform Commission (LRC) published a consultation paper in July 2023 and is currently reviewing the law on TPLF. A legislative reform is expected to permit regulated funding in the future.
Greece does not have specific legislation governing TPLF in either litigation or arbitration; no formal ban exists, but there is also no clear regulatory or supervisory regime. No widely reported cases or funders have emerged in Greece. While EU‑level regulation is under development, Greece has not yet adopted national measures.
There are several positive effects of TPLF, including:
On the other hand, TPLF has negative effects including:
TPLF is growing but remains a small part of the legal services market in Europe. In terms of economic effects there are different views: some report increased litigation costs and insurance premiums, others see no significant impact. Internal discussions highlight TPLF’s rapid growth in the EU, especially in countries such as Germany and the Netherlands. TPLF is linked to rising liability insurance costs, with parallels drawn to the U.S. experience, where social inflation (partly driven by TPLF) has significantly increased claims costs.
The regulatory approaches vary but there is a trend towards more transparency and basic safeguards. Stakeholders are divided between those who see TPLF as essential for access to justice and those concerned about potential abuses.
In general terms, the lack of transparency and oversight in Europe raises concerns about conflicts of interest and unpredictability for insurers and reinsurers.
With a joint statement published in November 2024, Insurance Europe, EuroCommerce, the European Justice Forum and the European Banking Federation, along with other European industry associations, strongly recommended EU regulation of TPLF, with the main aim of transparency and ethical standards to prevent conflicts of interest and ensure funders act in claimants’ best interests: “The introduction of a purely profit-motivated third party, often non‑EU based, into the traditional lawyer-client relationship, raises serious ethical concerns and presents an economic security threat for Europe. … Therefore, our organisations, representing a broad spectrum of European businesses, call for regulation of TPLF at EU level to help maintain trust in the justice and financial systems and to ensure that the legal environment remains just, fair, and balanced for all.”3
In the same vein, the Reinsurance Advisory Board (RAB) and other stakeholders have highlighted that TPLF is a rapidly expanding, billion-dollar, global phenomenon, with significant implications in terms of claims, inflation and litigation costs, and remains a largely unregulated and secretive industry. According to the “Policy brief: Towards regulating TPLF” published by the European Justice Forum in May 2025, industry groups (including the RAB) expressed great concerns about the risks posed by unregulated TPLF, such as increased litigation costs, lack of transparency, and potential exploitation of claimants.4 The RAB’s position is that clear, enforceable EU rules are needed to safeguard the integrity of judicial systems, protect businesses, and ensure fair outcomes for claimants.
All websites last accessed on 5 February 2026.
