Recent analysis of the issue of regulation of third-party litigation funding in the EU and the UK has highlighted a broad range of views and approaches. Any developments at EU level in relation to funding practices, as well as any potential changes to the UK framework, are of significant interest from an Irish perspective as third-party litigation funding is currently under active review by the Irish Law Reform Commission.
Introduction
The European Commission recently published a Mapping Study on third-party litigation funding in the EU (the “EU Study”) to assist in its future policy decision-making in this area, including in responding to the Resolution of the European Parliament on 13 September 2022, which recommended that common minimum standards for third-party litigation funding be established across the EU. A draft directive on the regulation of third-party litigation funding was annexed to the Resolution and views on that draft, including the degree of compatibility with existing measures, were examined as part of the EU Study.
In parallel, the UK’s Civil Justice Council (“CJC”) has, at the request of the UK Government, also been considering litigation funding and its regulation in the UK, and has on 2 June 2025 published its final report detailing numerous recommendations for reform.
Scope of the EU Study
The EU Study, which is over 700 pages in length, collected and analysed information on legal frameworks and practices of third-party litigation funding in all EU Member States, and also selected other countries (namely Canada, Switzerland, UK and the US). It involved legal analysis based on research and also national reports (including expert interviews), as well as a stakeholder consultation involving both a general survey and targeted interviews.
A comparative table can be found at page 66 of the EU Study that sets out an analysis of the compatibility between (i) the draft directive annexed to the Resolution and (ii) the position that currently pertains in various EU Member States and certain non-EU states. Individual national reports are also included for each jurisdiction examined.
Position in Ireland
Although third-party funding is currently unlawful in Ireland, this remains under consideration by the Irish Law Reform Commission (“LRC”). The LRC is currently examining responses to its 2023 Consultation Paper and its final report continues to be awaited (see our previous update here).
The national report for Ireland included in the EU Study was compiled by Professor David Capper of Queens University, Belfast. It provides further discussion of the current position in Ireland, including details of the LRC’s consultation as well as recent legislative changes in relation to third-party funding of international arbitrations in Ireland (discussed in our previous update here).
The conclusions in the national report for Ireland are that most of the provisions in the draft directive annexed to the Resolution would be workable in Ireland. The exception to that is the proposal that certain fiduciary duties would be placed on funders, with the view expressed that the nature of the duties proposed were too uncertain and too broad in scope.
The national report for Ireland did, however, observe that the level of regulation envisaged by the draft directive could potentially deter funders, as initially those funders would likely come mainly from the UK where (currently at least) they would not be subject to such regulation.
Position across the EU
Although data on the number of funded cases in the EU is limited, the EU Study identified nearly 300 entities involved in litigation funding that are active in the EU, with many operating across several Member States. Germany, the Netherlands, Belgium, France, Austria, Spain, Portugal, Denmark, Sweden and Italy were all noted as Member States where litigation funding is happening.
The research also identified that in most EU Member States, there is generally no specific regulation of third-party litigation funding. That is with the exception of provisions implementing Article 10 of the Representative Actions Directive (which requires Member States to put in place various safeguards where representative actions are, in so far as is permitted under national law, funded by a third party).
Position in the UK
The non-EU jurisdictions covered by the EU Study include the UK, where, as noted in the relevant national report, third-party funding is well established in both single-party and multi-party litigation. The EU Study observes that there is no formal legislation in the UK, with the system currently operating by way of self-regulation (including via oversight by representative bodies) and judicial scrutiny of funding agreements. The EU Study notes, however, that following the PACCAR[1] judgment (discussed in our previous insight here), discussions remain ongoing in relation to whether regulatory reform of third-party funding in the UK is necessary. It also notes an ongoing review of the subject is being undertaken by the UK’s CJC, with any change likely to await the CJC’s conclusions.
The CJC has since published its final report (the “CJC Report”) on 2 June 2025. The CJC Report, which takes account of the EU Study, has the stated overall objectives of providing effective access to justice, the fair and proportionate regulation of third-party litigation funding, as well improving the provision and accessibility of other forms of litigation funding. It details numerous recommendations (58 in total) for reform in the UK, including:
- The reversal of the effects of PACCAR – recommending that legislation to achieve this be introduced as soon as possible, making it clear that litigation funding is not a form of damages based agreement, and having retrospective effect.
- The introduction of light-touch regulation – replacing the current self-regulating approach and consistent with the principles published by the European Law Institute in 2024 (the ELI Principles). The CJC Report also recommends that a distinction be made between litigation funding for commercial parties and for consumers / parties involved in collective proceedings (with the latter requiring more, albeit still light-touch, regulation).
Other points of note include that the CJC Report rejects the idea of placing a cap on litigation funder’s returns and it does not support the idea of regulating funding of arbitration.
It is now for the UK Government to consider the CJC Report and decide whether, and to what extent, it will implement the recommendations included in it.
Conclusion
The Resolution leading to the EU Study, the ongoing review by the LRC in Ireland and the recent CJC Report in the UK reflect an increasing momentum for achieving clarity in relation to appropriate controls on third-party litigation funding. However, achieving this in practice is challenging, not least given the broad range of approaches and views held in relation to the role and regulation of third-party litigation funding across the EU, as well as globally.
Should litigation funding in the EU become more heavily regulated than the UK, this will have implications for the attractiveness of European jurisdictions for plaintiffs when deciding where to litigate, particularly where mass claims are involved.
From an Irish perspective, as discussed in previous updates (including here and here), the current prohibition on third-party litigation funding remains a potential barrier to the practical use of the Representative Actions Directive given that entities qualified to bring actions under the legislation must be non-profit in nature.
Any policy decisions of the European Commission on the subject, including directly in response to the Resolution, are therefore awaited with interest. It will also be interesting to see whether the LRC will take a similar approach to the CJC in any recommendations it makes in its final report.
Should you require further information about the issues discussed in this article, please contact Commercial Litigation and Dispute Resolution partners Julie Murphy-O'Connor, Michael Byrne or Angela Brennan or senior associate Emma Trainor or your usual Matheson contact.