The legal world is buzzing with debate over third-party litigation funding (TPLF), and the divide between the EU and the UK is widening. While the EU opts for a hands-off approach, the UK is moving towards stricter regulation—but which path is the right one?
The EU’s Stance: A Patchwork of Practices
In a move that has sparked both relief and concern, the European Commission has confirmed it will not introduce EU-wide regulation for TPLF. This decision came after European Commissioner for Justice, Michael McGrath, declared at the EU’s High-Level Forum on Justice for Growth that legislative intervention was unnecessary at this stage. Instead, the focus will be on monitoring the implementation of the Representative Actions Directive 2020/1828 by Member States. But here's where it gets controversial: this means the existing disparities in how TPLF is treated across the EU will persist. For instance, Ireland prohibits TPLF under its maintenance and champerty rules, with a single exception yet to be implemented for international commercial arbitration. In contrast, the Netherlands permits TPLF, making it a hotspot for mass tort claims. This lack of harmonization ensures that forum shopping—where claimants seek the most favorable jurisdiction—will remain a significant issue in cross-border product liability and consumer claims. And this is the part most people miss: the absence of a unified framework could undermine legal certainty and fairness across the EU.
The UK’s Approach: Regulation on the Horizon
Across the Channel, the UK is taking a markedly different route. The Civil Justice Council’s (CJC) Working Group published its Final Report on 2 June 2025, recommending a ‘light-touch’ statutory framework for commercial parties, enhanced regulation for consumer parties, and a reversal of the Supreme Court’s decision in R (on the application of PACCAR Inc & Ors) v Competition Appeal Tribunal & Ors [2023]. This ruling had classified litigation funding agreements (LFAs) as damages-based agreements (DBAs), making many existing LFAs unenforceable unless they met strict DBA regulations. The CJC’s emphasis on fair access to justice and structured safeguards for all parties highlights the UK’s proactive stance. However, these recommendations are still under government review, leaving the outcome uncertain.
The Bigger Picture: Opportunities and Challenges
The EU’s decision not to harmonize TPLF regulations leaves each Member State to navigate this complex landscape independently. While this may please those wary of EU intervention, others argue it’s a missed opportunity. A unified regulatory framework could have reduced forum shopping and ensured greater consistency across the EU, benefiting insurers, corporates, and claimants alike. This is especially relevant in light of recent EU legislative changes, such as the revised Product Liability Directive and the Representative Actions Directive. Looking ahead, coordinating defense strategies for parallel claims in the UK and EU will be crucial, given their differing funding dynamics.
Food for Thought
Is the EU’s hands-off approach a recipe for continued legal fragmentation, or does it preserve necessary flexibility? And is the UK’s push for regulation a step towards fairness, or an unnecessary burden on access to justice? These questions are far from settled, and the debate is only heating up. What’s your take? Share your thoughts in the comments—let’s keep the conversation going!
