Proposed regulation of litigation funding for proceedings in the EU

The European Parliament has published a proposed Directive to regulate commercial third party funding within the EU. The proposed Directive will not directly affect proceedings in England and Wales, but will apply to litigation funders based in the UK where they are funding proceedings in the EU.

Key recommendations include a provision invalidating a litigation funding agreement (absent exceptional circumstances) where it would mean diluting the claimant's share of the total award to 60% or less - so in other words, an effective cap on funders' recovery of 40%. Funding agreements would also be invalid where they granted explicit power to a funder to influence decisions or take control of the proceedings (including settlement and the management of expenses).

It will be interesting to see whether, if implemented, these proposals have any impact on funders' appetite to support proceedings within the EU.

For more information on the proposals, see this post on our Arbitration Notes blog.