EU supervision of third-party litigation funding insurance sector could benefit

The European Parliament plenary session adopted MEP Axel Voss’ own initiative legislative report on responsible third-party litigation funding (TPLF). The report calls on the European Commission to propose solutions for the effective supervision of TPLF in commercial and civil disputes.

Malene Bye Rasmussen, senior policy adviser at Insurance Europe, commented: “We welcome MEP Axel Voss’ report, which provides a strong basis for ensuring that the TPLF sector receives appropriate supervision. This would require TPLF providers to focus on the interests of funded claimants in both collective consumer redress actions and B2B disputes. It would also create significant benefits for both consumers and companies relying on funding agreements, and businesses defending funded claims.

Consumers and companies relying on funding agreements would be secure in the knowledge that funders could not charge exorbitant fees from any awards. Funders would also be required to have appropriate capital reserves to cover their commitments and would not be able to discontinue their financial support without cause

“For businesses defending funded claims, the risk of abusive litigation tactics would be minimised. This is because the court would have knowledge of the existence of a funding agreement and would have some powers to oversee conduct. This would offer a significant advantage in the current challenging economic environment.

Europe’s insurers would welcome a commitment by the European Commission to, during its current mandate, conduct further research into the impact of the TPLF sector.

This could be via an impact assessment or independent study and could enable the Commission to consider what action should be taken.

by Nataly Kramer