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European position

The European Commission has now confirmed that it does not intend to introduce EU-wide regulation of third-party litigation funding (TPLF). This arises following the European Commissioner for Justice, Michael McGrath, stating at the final meeting of the EU’s High-Level Forum on Justice for Growth that there was “no need” for legislative intervention at this stage. Instead, there will be a focus on ‘ensuring and monitoring’ the transposition of the Representative Actions Directive 2020/1828 by Member States.

This comes following the release of the Mapping Third Party Litigation Funding in the European Union report by the Commission in March 2025 (the Report), which set out the differences between all 27 Member States in their approach to TPLF, both in terms of legal framework and actual market practice. The Report included the results from a consultation with key stakeholders over the past few years including but not limited to: litigation funders, lawyers/law firms, businesses, consumer organisations and public authorities.

In practice, this decision preserves the existing differences in how funding is treated across the Member States. Some Member States maintain regulatory or judicial reticence towards TPLF. Ireland for instance is a jurisdiction which prohibits TPLF (under the rules of maintenance and champerty) with one exception – yet to be implemented – in the context of international commercial arbitration. Other jurisdictions however, like the Netherlands, permit TPLF, and this has made it fertile ground for mass tort claims.

The absence of a harmonised regime means forum shopping will continue to feature prominently in cross-border product liability and consumer claims across Europe, especially due to the often cited need for claimant funding in large group actions.

Position in the UK

The approach taken by the EU Commission is in contrast to the position in the UK, where the Civil Justice Council’s (CJC) Working Group made numerous recommendations in its Final Report on litigation funding which was published on 2 June 2025. The CJC recommended:

1. shifting to a “light-touch” statutory framework with a minimum base-line set of regulatory requirements for commercial parties;
2. enhanced regulation for consumer parties; and
3. for the Supreme Court decision in R (on the application of PACCAR Inc & Ors) (Appellants) v Competition Appeal Tribunal & Ors (Respondents) [2023] to be respectively and prospectively reversed to ensure litigation funding agreements (LFAs) are not treated as damages based agreements (DBAs), which classification would make many existing LFAs unenforceable unless they comply with strict DBA regulations.

The approach in the UK – i.e. towards possible regulation of TPLF – shows the emphasis placed by the CJC on the need for fair access to justice and the need for structured safeguards in place for all parties.

The recommendations set out in the CJC’s report are currently being considered by the Government.

Comment

The EU Commission’s decision to not harmonise the position between Member States means that each Member State will have to decide how to proceed and as we have seen in the UK, the debate about TPLF is likely to continue regardless of guidance given.

Those reluctant for the sector to be regulated in the EU will doubtless be buoyed by this development. Others however may see it as a potential missed opportunity, as a harmonised EU-wide regulatory framework could have assisted in reducing inevitable forum shopping and may have ensured a more consistent legal framework across EU Member States, thus strengthening legal certainty and fairness. This should also be considered by insurers and corporates in the wider context of recent legislative changes in the EU, including the revised Product Liability Directive and the Representative Actions Directive.

Going forward, it will be important to ensure the coordination of defence strategies where parallel claims arise in both the UK and the EU, given the differing funding dynamics.

Related item: A new approach to regulation of litigation funding in the UK