Our Director Guido Demarco wrote an opinion piece for Litigation Finance Journal talking about how the European Parliamente Research Service and the European Parliament’s Committee on Legal Affairs have suggested regulation regarding litigation funding.
Their research suggests setting a 30% cap on funders’ rates of return or the invalidation of LF agreements if they foresee a benefit for the claimant equal to or less than 60% (unless exceptional circumstances apply). In other words, a cap of 40%.
Demarco argues that wWhile this might be viewed as a logical measure to make litigation finance more affordable, what needs to be considered is that the funders’ expected return is simply a consequence of the risks and costs that arise from litigation, not the other way round.
“Limiting a funder’s expected return will not reduce financing costs for clients, and therefore will fail to make litigation more affordable, which is the aim of the EU’s regulation proposal. Funders will not grant funding if they perceive the risk/reward of a case is not worth the given circumstances.”
“Should funders charge any profiteering fee? No, but a cap to the fees may not be the solution. In the end, the direct beneficiaries of the proposed regulation could end up being certain states, which act as defendants in arbitration or judicial cases, rather than the individuals that the EU is attempting to protect.”
Read the full article here.