Third-party litigation financing or funding (TPLF) stricto sensu can be described as providing funds to a party in litigation in exchange for financer's participation in the awarded compensation or the amount reached in the settlement proceedings. Other forms of TPLF in a broader sense include e.g. agreements under which a lawyer undertakes to represent a client at the lawyer’s own costs and risk, while the funded party undertakes to pay the lawyer a proportion of the amount awarded to the client or the settlement amount (i.e. contingency fee agreements).
Collective actions are characterized by the protection of collective interests. The damages awarded in such proceedings are thus higher. Financers' interest to invest in such actions is therefore greater, while their funding is often times decisive when it comes to obtaining access to justice. On the other hand, the financial participation of third parties in collective actions increases the risk of filing actions with lower chances of success, financers gaining (too much) control over the proceedings, while the actual victims would not be adequately compensated, as the awarded or settled amount would first be distributed to the financer. Thus, the question of how TPLF is regulated in the context of collective actions is particularly important.
In the first part of the thesis the practice of TPLF in general and its development are presented, as well as the reasons for and against it. The second part of the thesis explores the regulation of TPLF of collective actions in different legal systems. The thesis also presents the regulation of TPLF in the upcoming directive on representative actions for the protection of the collective interests of consumers.
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