The Funding of Collective Redress by Entrepreneurial Parties: The EU and Dutch Context

Abstract

The development of collective redress in practice depends on the availability of adequate funding. In recent years third-party funding by entrepreneurial parties has become an important source of financing collective actions and settlements. Both at the EU level and in most of the Member States third-party litigation funding and related forms of entrepreneurial lawyering have generally been viewed with suspicion, though the new Representative Actions Directive (RAD) does enable third-party funding under certain conditions. The Netherlands is perhaps the Member State best known for its collective redress mechanisms, and the role of third-party funding has been important for its development. This paper discusses the financing of collective redress from a European and Dutch perspective. It assesses in how far EU law, and in particular the RAD, enables the third-party funding and how this has developed in the Netherlands. It concludes that the reluctance in Europe towards third-party funding is still visible, but the RAD and recent developments in the EU acknowledge its importance. As to the Netherlands, considering some restrictions in the latest legislative addition enabling collective action damage claims, it remains to be seen what role Dutch collective redress and developing funding mechanisms will play in Europe and beyond.

Keywords: collective redress, financing, third-party funding, entrepreneurial parties

JEL Classification: K12, K13, K22, K40, K41