Third Party Litigation Funding in Australia and Europe

Abstract

This paper addresses two questions. First is Third Party Litigation Funding (TPLF) truly commonplace across Australia and Europe (focusing on the UK)? Second what types of cases are funded by third-party sources?

The paper begins with a simple economic model of the factors affecting the prevalence of TPLF, and reviews how its prevalence might be measured. The remainder of the paper is divided into two major parts. The first part examines both the evolution of legal rules, and the nature of the market in TPLF in Australia. The second part looks at the situation in UK and Europe combined.

While Australia has led the world in terms of being the first jurisdiction to develop a robust TPLF market, with a history dating back some 20 years , we show it is still too early to say it is commonplace, given it constitutes less than 0.1% of the overall civil litigation market by volume per annum in Australia. In the UK, again it would seem inappropriate to describe TPLF as commonplace for the same reason. While the European market for TPLF appears to be still in its infancy. We outline a number of reasons why there are differences between countries in TPLF, focusing on the evolution of legal rules. It seems clear that historically a hostile legal environment for TPLF severely limited the early development of TPLF in Australia and the UK. While the legal environment in these jurisdictions has become more accommodating overtime, ongoing uncertainty about the legal rules that apply to TPLF may still be hindering its further development. Commercial and insolvency cases tend to be a focus, but again the cases funded depend to some extent on the legal rules in the jurisdiction, and in particular the extent to which class actions have been permitted to develop.

Keywords: Litigation funding, economics, Law, maintenance, champerty

JEL Classification: D02, K00, K41