Activities of Marie TOUSSAINT related to 2020/2130(INL)
Shadow reports (1)
REPORT with recommendations to the Commission on Responsible private funding of litigation
Amendments (111)
Amendment 1 #
Motion for a resolution
Citation 1 a (new)
Citation 1 a (new)
— – having regard to Article 47 of the Charter of Fundamental Rights of the European Union,
Amendment 2 #
Motion for a resolution
Citation 1 b (new)
Citation 1 b (new)
— – having regard to Article 9 of the UNECE Convention on Access to Information, Public Participation in Decision-making and Access to Justice in Environmental Matters,
Amendment 3 #
Motion for a resolution
Recital -A (new)
Recital -A (new)
-A. Whereas Member States have a primary responsibility to make adequate legal aid available to those who lack sufficient resources in view of ensuring access to justice for all, in line with article 47 of the Charter of Fundamental Rights of the European Union;
Amendment 4 #
Motion for a resolution
Recital -A a (new)
Recital -A a (new)
-A a. whereas third party litigation funding (TPLF) could be used as a tool to support access to justice, if properly regulated, including by introducing safeguards to protect claimants and filter out ill-intentioned and overly speculative funders;
Amendment 7 #
Motion for a resolution
Recital A
Recital A
A. whereas third party litigation funding (TPLF) is a growing practice whereby commercial investors (‘litigation funders’) who are not a party to a dispute invest in legal proceedings and pay legal and other expenses, in exchange; whereas sometimes these funders can be commercial investors asking in return for a share of any eventual award; whereas TPLF does not onlycan occur in collective redress cases but alsoas well as in arbitration and insolvency proceedings;
Amendment 9 #
Motion for a resolution
Recital A a (new)
Recital A a (new)
A a. whereas currently only very few cases of TPLF have been reported in Member States;
Amendment 17 #
Motion for a resolution
Recital B
Recital B
B. whereas litigation funders involved in legal proceedings act in their own economic interest, rather than in the interest of claimants; whereas they can seek to control the litigation and demand an outcome that pays them the greatest return3 ; _________________ 3 The Australian Parliament concluded “the level of power and influence litigation funders have in class actions gives rise to situations where their financial interests trump those of the representative plaintiff and class members”, see Australian Law Reform Commission (2019): An Inquiry into Class Action Proceedings and Third- Party Litigation funders, p 19.can act in the interest of claimants, in support of a general public interest and/or in their own economic interest;
Amendment 20 #
Motion for a resolution
Recital B a (new)
Recital B a (new)
B a. whereas, while TPLF is quasi- inexistant in Europe, it is a booming phenomenon in investment arbitration that multiplies the number and the volume of claims of private investors against States;
Amendment 21 #
Motion for a resolution
Recital B b (new)
Recital B b (new)
B b. whereas the increased recourse by investors to investment arbitration has a detrimental regulatory chilling effect on States and, in particular, deters States from enacting new social and environmental protection norms;
Amendment 22 #
Motion for a resolution
Recital B c (new)
Recital B c (new)
B c. whereas by multiplying the number and the amount of investment arbitration claims against States, TPLF multiplies the already heavy financial burden that investment arbitration claims, whether successful or not, represent for States;
Amendment 23 #
Motion for a resolution
Recital C
Recital C
C. whereas litigation funders often demand a disproportionate share of the proceeds that exceed the typical returns of other types of investments; whereas the rates of returns for litigation funders can be up to 300% or in some cases even 3 000%4 , directly taking from the compensation available for claimants5 ; _________________ 4 See Bentham(2014): Submission to the Ministry of Security and Justice. Dutch Draft Bill on Redress of Mass Damages in a Collective Action, par. 2.15 on page 5 as well as 1266/7/7/16 Walter Hugh Merricks CBE v MasterCard Incorporated an has happened in cases outside the Union that litigation funders demanded a disproportionate share of the proceeds that exceed Others – Judgment (CPO Application) [2017] CAT 16 | 21 Jul 2017 in section 99 and 100 on page 37 and 38. 5 In Australia, the median return for claimants of collective redress proceedings involving TPLF is 51% while claimants of legal proceedings without the involvement of litigation funders get 85%. See Australian Law Reform Commission (2019): An Inquiry into Class Action Proceedings and Third-Party Litigation Litigation funders, p 83. typical returns of other types of investments;
Amendment 28 #
Motion for a resolution
Recital D
Recital D
D. whereas litigation funders seem to argue that only they can provide access to justice, there are in fact otherthere are different ways to seek redress, such as through litigation, mediation, ADR/ODR, the Ombudsman or through grievance systems managed by companies; whereas, those solutions could result in faster and more adequate compensation for claimants;
Amendment 34 #
Motion for a resolution
Recital E
Recital E
Amendment 37 #
Motion for a resolution
Recital F
Recital F
F. whereas the number of litigation funders is increasing with currently more than 45 known to operate in the EU; whereas, the practice of TPLF however remains largely unregulated in the Union, despite presenting material risks to the administration of justice, TPLF remains rarely used and largely unregulated in the Union;
Amendment 39 #
Motion for a resolution
Recital G
Recital G
Amendment 44 #
Motion for a resolution
Recital H
Recital H
H. whereas Directive (EU) 2020/1828 identifies certain opportunities and safeguards relating to litigation funding, which are, however, limited to representative actions on behalf of consumers taken under that Directive, and therefore exclude many other types of action or categories of claimants; whereas, enabling measures and effective safeguards should apply to all types of claims;
Amendment 46 #
Motion for a resolution
Recital H a (new)
Recital H a (new)
H a. whereas all Member States are party to the Aarhus Convention and therefore also specifically obliged to provide adequate and effective remedies with regard to environmental claims, in line with article 9(4) of this Convention. To this end, all judicial and administrative procedures should be fair, equitable, timely and not prohibitively expensive.
Amendment 48 #
Motion for a resolution
Paragraph 1
Paragraph 1
1. ObservNotes that third party litigation funding is a rapidly expanding commercial practice in the Union, which has a significant impact on justice systems as well as on European citizens. Notes that litigation funding is so farso far rarely used and largely unregulated in the Union;
Amendment 54 #
Motion for a resolution
Paragraph 2
Paragraph 2
2. Firmly bBelieves that in order to ensure thataccess to justice for all and to build justice systems that prioritise redress for victims of injustice, and not the interests of investors who may seek commercial opportunity from disputes, a regulatory regime addressing key issues relevant to litigation funding, including transparency, fairness, and proportionality, is necessaryuseful;
Amendment 56 #
Motion for a resolution
Paragraph 2 a (new)
Paragraph 2 a (new)
2 a. Stresses that such an initiative must be without prejudice to existing Union and national rules establishing a legal framework for mechanisms for collective redress offered by non-profit- making entities qualified for representative actions, as well as to any other public interest litigation, including but not limited to litigation that falls under Article 9 of the Aarhus Convention;
Amendment 58 #
Motion for a resolution
Paragraph 3
Paragraph 3
3. Strongly bBelieves that only the regulation of litigation funders will allowsupport regulators to exercise effective oversight and adequately ensure that the interests of claimants are protected. Points out that also no or hardly any voluntary regulatory mechanisms and codes of conduct have not been subscribed to by the large majority of funders, leaving claimants significantly exposedput in place;
Amendment 59 #
Motion for a resolution
Paragraph 3 a (new)
Paragraph 3 a (new)
3 a. Firmly believes that third party funding of investment arbitration procedures should be prohibited considering that the lack of transparency in investment arbitration procedures would make new transparency, governance, capital adequacy or other obligations for funders impossible to enforce. Underlines that third party litigation funding of investment arbitration multiplies the regulatory chilling effect and financial burdens for States of such proceedings and that its prohibition would protect the ability of States to legislate in the general interest.
Amendment 60 #
Motion for a resolution
Paragraph 3 a (new)
Paragraph 3 a (new)
3 a. Considers that commercial TPLF shows similarities to financial services, in particular investment funds and hedge funds. Therefore, TPLF rules should be applied without prejudice to existing relevant national, Union and international provisions regarding financial services.
Amendment 61 #
Motion for a resolution
Paragraph 3 b (new)
Paragraph 3 b (new)
3 b. Points out that Directive2020/1828 sets out rules to ensure that a representative action mechanism for the protection of the collective interests of consumers is available in all Member States, while providing appropriate safeguards to avoid abusive litigation;
Amendment 63 #
Motion for a resolution
Paragraph 4
Paragraph 4
4. Recommends the establishment of a system of authorisation for litigation funders, permitting the introduction ofwhich enables genuine access to justice for all. Believes that such system should include corporate governance requirements and supervisory powers to protect claimants, and to ensure that funding is only provided by entities that are committed to complying with minimum standards in terms of independence, transparency, governance and capital adequacy, and observing a fiduciary relationship vis-à-vis claimants and intended beneficiaries;
Amendment 67 #
Motion for a resolution
Paragraph 5
Paragraph 5
5. Recommends that litigation funders be obliged to respect a fiduciary duty of care requiring them to act in the best interests of a claimant. BelievStresses that litigation funders should be prevented from exercisingcannot have any control over the legal proceedings they fund, which shouldmust be the sole responsibility of the claimant and their legal representatives. Points out that such control over the legal proceedings they fund can consist both of formal control, such as a contractual power to make decisions, and informal control, such as the threat to withdraw the funding;
Amendment 72 #
Motion for a resolution
Paragraph 6
Paragraph 6
6. Underlines that conflicts of interest may arise where there are pre-existing contractual relationships between litigation funders, qualified entities, law firms, aggregators, including claims-collection and award- distribution- platforms, and other actors who may be involved in claims. Notes that there is a trend of an increasingly close cooperation, with, for example, litigation funders agreeing to finance law firms across a series of future cases (portfolio funding)7 . Recommends that safeguards are adopted to prevent such conflicts, set out claimants’ rights and to require that details of relationships between litigation funders and the other involved parties are disclosed; _________________ 7 EPRS Study (2021): Responsible litigation funding. State of play on the EU private litigation funding landscape and on the current EU rules applicable to private litigation funding, p. 28 -29.
Amendment 76 #
Motion for a resolution
Paragraph 8
Paragraph 8
8. Believes that, just like claimants, litigation funders should be responsible for the defendants’ costs arising from unsuccessful litigation (such as an adverse cost award). Is of the opinionStresses that regulation should prevent litigation funders from limiting their liability to costs in the event of an unsuccessful outcome;
Amendment 78 #
Motion for a resolution
Paragraph 9
Paragraph 9
9. Considers that legislation should impose limits on the proportion of the award that litigation funders are entitled to by virtue of a funding agreement. Believes that only under exceptional circumstances arrangements between litigation funders and claimants should vary from the rule that a minimum of 670% of the gross settlement or damages is paid to the claimants;
Amendment 79 #
Motion for a resolution
Paragraph 10
Paragraph 10
10. Considers that there should be transparency regarding the involvement of litigation funding in legal proceedings, including obligations forby having claimants and their lawyers to disclose funding agreements to courts and defendantsinform courts and defendants that they receive commercial third-party funding for the case at hand. Notes that, currently, courts or administrative authorities and defendants are often not aware that a claim is funded by a commercial actor. Points out that this can also hinder a court or administrative authority in properly considering costs issues and in ensuring that awards compensate claimants adequately;
Amendment 89 #
Motion for a resolution
Paragraph 12
Paragraph 12
12. Requests the Commission to submit a proposal for a directive to regulate commercial third party litigation funding, following the recommendations set out in the Annex hereto;
Amendment 91 #
Motion for a resolution
Annex I – paragraph 10 – point 1
Annex I – paragraph 10 – point 1
(1) TCommercial third-party litigation funding is a commercial practice which is quicklycould developing into a litigation services market without any properspecific legislative framework being in place at Union level. Despite the fact that litigation funders are regularly established and operating in various Member States, domestically or across borders, they have so far been subject to different national rules and practices. Diverging rules and practices in Member States are likely to constitute an obstacle to the functioning of the internal market. AThere is a lack of clarity on the terms on which commercial third party litigation funders (‘litigation funders’) may operate, in particular taking into account that litigation funders can easily be attracted by cross-border cases, isas regards potential abuses by market competitors that may result in effects that would be not compatible with the proper functioning of the internal market. Divergences in the legal framework applicable in each Member State entail a risk of forum shopping by litigation funders, which could be influendiscrimination in access to justiced by the favourability of certain national rules concerning their establishment, the law applicable to funding agreements and national procedural rulesetween claimants in different Member States, in particular in cases with a cross- border element.
Amendment 94 #
Motion for a resolution
Annex I – paragraph 10 – point 1 a (new)
Annex I – paragraph 10 – point 1 a (new)
(1 a) Commercial third-party litigation funding shows similarities with financial services. Therefore third-party litigation funding rules should be applied without prejudice to existing national, Union and international provisions regarding financial services in view of ensuring full protection of service users.
Amendment 95 #
Motion for a resolution
Annex I – paragraph 10 – point 2
Annex I – paragraph 10 – point 2
(2) Union law seeks to ensure a balance between access to justice and providinghould seek to enable access to justice for all, as enshrined in article 47 of the Charter of Fundamental Rights of the European Union. However, recent experiences, such as the Dieselgate scandal, have shown that individuals are not in a position to obtain compensation and damages in cases where their rights under Union law are infringed. Individuals are in numerous cases prevented from taking up their right to an effective remedy due to the high costs of entering and pursuing legal proceedings. These difficulties can also lead to distortions of fair competition between undertakings that cause harm and those that do not. In those circumstances, mechanisms to facilitate litigation to obtain compensation and damages such as third-party litigation funding, in particular in case of a not-for profit interest on behalf of the funder, could help lift this barrier and should be encouraged. At the same time, it is important to provide appropriate safeguards to those engaged in proceedings, to prevent their wishright to access justice from being unjustly exploited. When litigation funders provide financing for legal proceedings in exchange for a share of any compensation awarded, a material risk of injustice canould arise. That risk includes litigation funders being able to take advantage of claimants, or those they represent, including where relevant consumers whose interests are represented by qualified entities, to serve their own purposes and to maximise their own return, thu to maximise their own return to an extent that it is leaving claimants or intended beneficiaries materially disadvantaged. The risks can be particularly acute where those expecting to benefit from litigation are consumers, who might welcome the involvement of a litigation funder ready to pay for proceedings, without appreciating that their interests could be subverted in favour of the litigation funder’s own interests.
Amendment 100 #
Motion for a resolution
Annex I – paragraph 10 – point 3
Annex I – paragraph 10 – point 3
(3) As the internal market facilitates increasing cross-border trade, as disputes are increasingly cross-border, and as the activities of litigation funders are global in nature, there is a potential risk of material divergences in Member State approaches to safeguards and the protections necessary with regard to third party funding is acute. Voluntary approaches have not been successful or subscribed to by the majority of the industry, and, in any event, non- legislative measures would not be appropriate in light of such material risks, including to consumers.
Amendment 103 #
Motion for a resolution
Annex I – paragraph 10 – point 4
Annex I – paragraph 10 – point 4
(4) This Directive aims to regulate commercial third-party litigation funding, a commercial practice whereby third-party entities not directly involved in a dispute invest for profit in legal proceedings, typically in exchange for a percentage of any settlement or award. Third-party litigation funding does not include provision of funds to sponsor litigation on a charitable or donated basis, or similar activities carried out on a pro bono publico basis. This Directive also aims to lay down safeguards to prevent conflicts of interest, and abusive litigation, especially in competitive situations, as well as the disproportionate allocation of monetary awards to litigation funders. It does not cover any recuperation of costs but is strictly limited to situations in which a commercial actor seeks to recoup part of the compensation or damages awarded by a court in civil litigation, in order to further its business interest.
Amendment 107 #
Motion for a resolution
Annex I – paragraph 10 – point 4 a (new)
Annex I – paragraph 10 – point 4 a (new)
(4 a) This Directive aims to prohibit third-party funding for investment arbitration, considering the impossibility to enforce governance, transparency, capital adequacy, and observance of a fiduciary duty obligations in this opaque domain of dispute settlement. This prohibition also aims to preserve States form a multiplication of the number and the volume of investors’ claims that hinders States’ ability to regulate in the general interest.
Amendment 108 #
Motion for a resolution
Annex I – paragraph 10 – point 5
Annex I – paragraph 10 – point 5
(5) The term ‘litigation funder’ should be understood to refer to any commercial undertaking that is not a party to proceedings, but enters into a third-party litigation funding agreement (‘third-party funding agreement’) in relation to those proceedings. In line with the case-law of the Court of Justice of the European Union, the concept of ‘undertaking’ includes any entity engaged in an economic activity, regardless of its legal status and the way in which it is financed, and therefore includes any legal person, including its parents, subsidiaries or affiliates and could include professional litigation-funding providers, financial services providers, claims management firms or other service providers. The specification that an undertaking is commercial clarifies that the undertaking must be established with the intention to make profits. This excludes non-governmental organisations, foundations and other organizations working for the public interest as well as public entities. The concept of litigation funder is not intended to include lawyers representing a party in legal proceedings, or regulated providers of insurance services to such a party.
Amendment 109 #
Motion for a resolution
Annex I – paragraph 10 – point 6
Annex I – paragraph 10 – point 6
(6) In accordance with the legal traditions and autonomy of the Member States, it is for each Member State to determine whether, and to what extent, the provision of litigation funding should be permitted within its own legal system. Where Member States choose to permit such commercial third party litigation funding, this Directive provides for minimum standards for the protection of funded claimants, so that those who might have recourse to litigation funding in the Union are covered by a minimum level of protection, which is consistent across the Union.
Amendment 111 #
Motion for a resolution
Annex I – paragraph 10 – point 7
Annex I – paragraph 10 – point 7
(7) Where third party litigation funding activity is permitted, a system for the authorisation and supervision of commercial litigation funders by independent administrative bodies in the Member States is necessaryuseful to ensure that such litigation funders meet the minimum criteria and standards laid down in this Directive. Litigation funders should be subject to oversight in a manner similar to that of the existing prudential supervision system applicable to financial services providers.
Amendment 112 #
Motion for a resolution
Annex I – paragraph 10 – point 8
Annex I – paragraph 10 – point 8
(8) LCommercial litigation funders active in the Union should be required to conduct their business from within the Union, be authorised within the Union, and to conclude their third-party funding agreements subject to the laws of the Member State of the proceedings or, if different, the Member State of the claimant or intended beneficiaries, in order to ensure that supervision under Union and national law is adequate.
Amendment 113 #
(9) Supervisory authorities within the Union granting authorisations to conduct commercial third-party litigation funding activities should be operating independently from any private, political or governmental influence. They should be empowered to require that litigation funders comply with minimum criteria laid down by this Directive. Such criteria should include provisions relating to governance, transparency, capital adequacy, and observance of a fiduciary duty to claimants and intended beneficiaries. Supervisory authorities should be empowered to make any necessary orders, including the power to receive from litigation funders applications for authorisation and to decide upon them, to gather any necessary information, grant, deny or withdraw any authorisation or to impose any condition, restriction or penalty upon any litigation funder, as well as to investigate any complaint against any litigation funder conducting activities within their jurisdiction. During a litigation procedure, a complaint coming from a defendant against a litigation funder who is funding the ongoing case against them, should be considered non-admissible, as the funding agreement will already be reviewed by the competent court or administrative authority and additional possibilities to challenge the funding would obstruct the main proceedings.
Amendment 120 #
Motion for a resolution
Annex I – paragraph 10 – point 11
Annex I – paragraph 10 – point 11
(11) Litigation funders should be required to commit to being bound to a duty to act fairly, transparently and in the best interests of claimants and intended beneficiaries of claims. A lack of a requirement to place the interests of claimants and intended beneficiaries ahead of a litigation funder’s own interests creates the risk of proceedings being directed in a manner that ultimately serves the interests of the litigation funder, rather than those of the claimant.
Amendment 121 #
Motion for a resolution
Annex I – paragraph 10 – point 12
Annex I – paragraph 10 – point 12
(12) To prevent circumvention of the requirements of this Directive, agreements entered into with commercial third party funders not having the necessary authorisation should have no legal effect. The burden to acquire the necessary authorisations should be on litigation funders themselves, and therefore claimants and intended beneficiaries should be indemnified in respect of any harm caused by a litigation funder not having the necessary authorisation.
Amendment 125 #
Motion for a resolution
Annex I – paragraph 10 – point 13
Annex I – paragraph 10 – point 13
(13) This Directive should regulate the activities of commercial litigation funders, but should be without prejudice to any other regulatory obligations or regimes that may apply.
Amendment 126 #
Motion for a resolution
Annex I – paragraph 10 – point 16
Annex I – paragraph 10 – point 16
(16) To facilitate the provision of cross border litigation funding services in those Member States where it is permitted under national law, Member States should be able to cooperate, share information, and should be required to take full account of each other’s authorisation decisions. In line with article 56 TFEU, Member States should mutually recognise prior authorisations and therefore automatically grant authorisation to litigation funders operating in their Member State, that have been authorised to operate in another Member State for as long as the initial authorisation continues to exist. In case a supervisory authority in a receiving Member State is aware of irregularities in the conduct of the litigation funder, it should directly inform the responsible supervisory authority.
Amendment 129 #
Motion for a resolution
Annex I – paragraph 10 – point 17
Annex I – paragraph 10 – point 17
(17) Member States should ensure that decisions regarding the relevant legal proceedings, including decisions on settlement, are not unduly influenced or controlled by the litigation funder in a manner that would be detrimental to the interests of the claimants concerned by that action.
Amendment 130 #
Motion for a resolution
Annex I – paragraph 10 – point 18
Annex I – paragraph 10 – point 18
Amendment 134 #
Motion for a resolution
Annex I – paragraph 10 – point 22
Annex I – paragraph 10 – point 22
(22) The adequacy of supervision of litigation funders and third-party funding agreements cannot be ensured absent obligations on litigation funders to be transparent regarding their activities. This includes transparency vis-à-vis courts or administrative authorities, defendants and claimants, and therefore obligations should apply to disclose those parts of third party funding agreements in full tothat are needed for the competent courts or administrative authorities and defendato assess the legality of the agreements, subject to appropriate limitations to protect any necessary confidentiality.
Amendment 144 #
Motion for a resolution
Annex I – paragraph 10 – point 25
Annex I – paragraph 10 – point 25
(25) Litigation funders that have a direct interest in the financial outcome of proceedings may be incentivised to claim unfair, disproportionate or unreasonable rewards at the expense of claimants. Courts or administrative authorities should be empowered to assess the context of third- party funding agreements relevant to the case before them, including the legal position and the knowledge of the claimants, in order to determine effectively whether in all the circumstances the third- party funding agreement is fair and complies with theis Directive and all relevant laws of the Member State concerned.
Amendment 146 #
Motion for a resolution
Annex I – paragraph 10 – point 27
Annex I – paragraph 10 – point 27
(27) As the share of any reward received by litigation funders can reduces any relief obtained by claimants, courts or administrative authorities should exercise oversight over the value and proportion of this share to prevent any disproportionate allocation of monetary awards to litigation funders. As the share payable to the litigation funder can be considered as an additional legal or procedural cost, the competent court or administrative authority can decide to count this as an additional charge to be compensated by the defendant in case the latter loses the case. Save in exceptional circumstances, when a share of any reward claimed by a litigation funder would dilute the share of any totalcompensation and damages award (including all damages amounts, costs, fees and other expenses) available to claimants and intended beneficiaries to 670% or below, it should be presumed unfair and invalid.
Amendment 149 #
Motion for a resolution
Annex I – paragraph 10 – point 28
Annex I – paragraph 10 – point 28
(28) Additional conditions should be put in place to ensure that litigation funders do not influence the decisions of claimants in the course of proceedings in a manner that would only benefit the litigation funder itself. In particular, litigation funders should not direct or influence decisions on how cases are pursued, which interests are prioritised, or whether or not claimants should accept any particular outcome, award or settlement.
Amendment 152 #
Motion for a resolution
Annex I – paragraph 10 – point 30
Annex I – paragraph 10 – point 30
(30) Where commercial litigation funders have instigated, supported or funded proceedings which are not successful, they should be jointly liable with claimants for any adverse costs they caused defendants to incur and that may be awarded by courts or administrative authorities. Courts or administrative authorities should be granted adequate powers to ensure the effectiveness of such an obligation, and third party funding agreements should not exclude responsibility for such adverse costs.
Amendment 154 #
Motion for a resolution
Annex I – paragraph 10 – point 33
Annex I – paragraph 10 – point 33
(33) The objectives of this Directive, namely to ensure the harmonisation of Member States’ rules applicable to commercial litigation funders and their activities, and thus to ensureable access to justice while ensuring that common minimum standards for the protection of the rights of funded claimants and intended beneficiaries in proceedings financed wholly or in part by third-party funding agreements apply in all Member States, cannot be sufficiently achieved by the Member States as litigation funders could operate in multiple Member States and arcould be subject to different national rules and practices, but canould rather, by reason of the scale of the slowly emerging market of third-party litigation funding, the need to avoid diverging rules and practices that are likely to constitute an obstacle to the proper functioning of the internal market and the need to avoid ‘forum shopping’ by litigation funders seeking to optimise national rules, be better achieved at Union level. The Union may thus adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty on European Union. In accordance with the principle of proportionality, as set out in that Article, this Directive does not go beyond what is necessary in order to achieve those objectives.
Amendment 159 #
Motion for a resolution
Article 1 – paragraph 1
Article 1 – paragraph 1
This Directive is aimed at harmonising the rules of Member States applicable to commercial third- party litigation funders (‘litigation funders’) and their authorised activities, and also atin order to provide a supportive framework, similar to the ones in place for such a financial services, that also protectings funded claimants and intended beneficiaries, including where relevant those whose interests are represented by qualified entities, in proceedings financed wholly or in part by third-party litigation funding. It lays down safeguards to prevent conflicts of interest, abusive litigation as well as the disproportionate allocation of monetary awards to litigation funders.
Amendment 160 #
Motion for a resolution
Article 1 – paragraph 1
Article 1 – paragraph 1
This Directive is aimed at harmonising the rules of Member States applicable to third- party litigation funders (‘litigation funders’) and their authorised activities, and also at protecting funded claimants and intended beneficiaries, including where relevant those whose interests are represented by qualified entities, in proceedings financed wholly or in part by third-party litigation funding. It prohibits third-party funding of investment arbitration proceedings. It lays down safeguards to prevent conflicts of interest, abusive litigation as well as the disproportionate allocation of monetary awards to litigation funders.
Amendment 162 #
Motion for a resolution
Article 2 – paragraph 1
Article 2 – paragraph 1
This Directive applies to commercial third party litigation funders and to the third- party funding agreements that they are entitled to offer to claimants in the Union.
Amendment 163 #
Motion for a resolution
Article 2 – paragraph 1 a (new)
Article 2 – paragraph 1 a (new)
This Directive is without prejudice to existing Union and national rules establishing a legal framework for mechanisms for collective redress offered by non-profit-making entities qualified for representative actions.
Amendment 164 #
Motion for a resolution
Article 2 – paragraph 1 b (new)
Article 2 – paragraph 1 b (new)
This Directive regulates recuperation of costs by a commercial undertaking that form part of the compensation or damages awarded by a court in civil litigation to a claimant other than the litigation funder. It does not apply to any other proceedings, in particular not to litigation that seeks to protect a public interest, rather than seeking to compensate harm to an individual.
Amendment 165 #
Motion for a resolution
Article 3 – paragraph 1 – point a
Article 3 – paragraph 1 – point a
(a) ‘litigation funder’ means any commercial undertaking that enters into a commercial third-party funding agreement in relation to proceedings, even though it is neither a party to those proceedings, a lawyeregal representingative to a party to such proceedings, or a provider of regulated insurance services to a party in such proceedings, and which has the primary aim of receiving a return on investment from providing funding or to obtain a competitive advantage in a specific market;
Amendment 168 #
Motion for a resolution
Article 3 – paragraph 1 – point b
Article 3 – paragraph 1 – point b
(b) ‘claimant’ means any natural or legal person who brings or intends to bring proceedings against another party before a court or administrative authority in order to obtain compensation or damages in the form of a monetary award;
Amendment 169 #
Motion for a resolution
Article 3 – paragraph 1 – point b a (new)
Article 3 – paragraph 1 – point b a (new)
(b a) ‘commercial undertaking’ means any for-profit, private entity engaged in an economic activity, regardless of its legal status and the way in which it is financed;
Amendment 172 #
Motion for a resolution
Article 3 – paragraph 1 – point e
Article 3 – paragraph 1 – point e
(e) ‘‘proceedings’ means any domestic or cross border civil or commercial litigation, or any voluntary arbitration procedure or alternative dispute resolution mechanism, through which redresscompensation or damages in the form of a monetary award before a court or administrative authority in the Union is sought concerning a dispute;
Amendment 174 #
Motion for a resolution
Article 3 – paragraph 1 – point e b (new)
Article 3 – paragraph 1 – point e b (new)
(e b) 'investment arbitration proceedings' means proceedings initiated by investors against States on the basis of an investment protection agreement;
Amendment 177 #
Motion for a resolution
Article 3 – paragraph 1 – point h
Article 3 – paragraph 1 – point h
(h) ‘third-party funding agreement’ means an commercial agreement in which a litigation funder has the primary aim on receiving a return on investment and therefore agrees to fund of all or part of the costs of proceedings in exchange for receiving a share of the monetary amount awarded to the claimant or a success fee, so as to cover the reimbursement of its funding and, where applicable, remuneras part of the compensation for the service provided, based wholly or partially on the outcome of proceedingsdamages granted. This definition includes all agreements in which such a reward is agreed, whether offered as an ‘arm’s length’ service, or achieved through a purchase or assignment of the claim.
Amendment 181 #
Motion for a resolution
Article 4 – point 1 a (new)
Article 4 – point 1 a (new)
1 a. Members States shall not authorise third-party funding for investment arbitration proceedings.
Amendment 186 #
Motion for a resolution
Article 5 – point 1 – introductory part
Article 5 – point 1 – introductory part
1. Member States shall ensure that supervisory authorities only grant or maintain authorisations, whether for domestic or cross-border litigation or other proceedings, to litigation funders who either do not obtain more than 10% of the final compensation or damages awarded or which comply with the provisions of this Directive, and who meet, in addition to any suitability or other criteria as may be set out in national law, at least the following criteria:
Amendment 188 #
(a) they conduct their business through a registered office in a Member State, and apply for and maintain an authorisation in that samea Member State;
Amendment 189 #
Motion for a resolution
Article 5 – point 1 – point c
Article 5 – point 1 – point c
(c) they demonstrate to the satisfaction of the supervisory authority that they have procedures and governance structures in place to ensure their ongoing compliance with this Directive, with the transparency requirements and fiduciary relationships this Directive provides for, and with any additional national requirements relating to the conclusion of third-party funding agreements;
Amendment 191 #
Motion for a resolution
Article 5 – point 1 a (new)
Article 5 – point 1 a (new)
1 a. Member States shall mutually recognise authorisation given to a litigation funder in another Member State and therefore automatically allow them to operate in their Member State, for as long as the initial authorisation continues to exist.
Amendment 197 #
Motion for a resolution
Article 6 – point 1 a (new)
Article 6 – point 1 a (new)
1 a. Litigation funders may demonstrate that they meet the criteria set out in paragraph 1 by reference to insurance that would fully cover these costs, if necessary.
Amendment 201 #
Motion for a resolution
Article 6 – point 2
Article 6 – point 2
2. Member States shall ensure that supervisory authorities are empowered to verify whether litigation funders would be able to maintain access at all times to the minimum liquidity required to pay in full all foreseeable adverse costs in all proceedings they have funded. Members States shall ensure that their courts or administrative authorities can request litigation funders to provide security for costs in the forms admitted by national law, should a defendant so request based on reasoned specific concernsif the supervisory authority considers this appropriate.
Amendment 202 #
Motion for a resolution
Article 6 – point 2 a (new)
Article 6 – point 2 a (new)
2 a. Member States shall set up a specific insurance fund to cover all the outstanding costs of claimants that engaged in litigation in good faith, in case a litigation funder becomes insolvent in the course of the litigation procedure. This fund shall be publicly managed and financed through annual fees payable by authorised litigation funders.
Amendment 203 #
Motion for a resolution
Article 6 – point 2 b (new)
Article 6 – point 2 b (new)
2 b. Authorised litigation funders shall annually report on their solvency status to the competent supervisory authority.
Amendment 204 #
Motion for a resolution
Article 7 – point -1 (new)
Article 7 – point -1 (new)
Amendment 207 #
Motion for a resolution
Article 7 – point 2
Article 7 – point 2
2. Where a claimant intends to take a claim on behalf of others in proceedings, such as where the claimant is a qualified entity representing consumers, the litigation funder shall also be required to owe a fiduciary duty to such intended beneficiaries. Litigation funders shall be obliged to acting in a manner that is consistent with their fiduciary duty throughout the course of proceedings. In the event of a conflict between the interests of the litigation funder and those of claimants or intended beneficiaries, the litigation funder shall commit to placing the interests of the claimants or intended beneficiaries above its own interests. During a litigation procedure, the defendant cannot submit a complaint against a litigation funder who is funding the ongoing case against them.
Amendment 213 #
Motion for a resolution
Article 8 – point 3 – point b
Article 8 – point 3 – point b
(b) take any decisions necessary to grant or deny authorisation to any applicant litigation funder, to withdraw any authorisation, or to impose any conditions, restrictions or penaltyies upon any authorised litigation funder;
Amendment 219 #
Motion for a resolution
Article 8 – point 3 – point e
Article 8 – point 3 – point e
(e) assess at least every year whether an authorised litigation funder continues to comply with the criteria for authorisation referred to in Article 5(1) and ensure that such authorisation is withdrawn if it no longer complies with one or more of those criteria.
Amendment 222 #
Motion for a resolution
Article 8 – point 4
Article 8 – point 4
4. Member States shall ensure that litigation funders are required to notify a supervisory authority without delay of any changes affecting compliance by a litigation funder with the capital adequacy requirements laid down in Article 6 paragraphs 1 and 2. In addition, Member States shall ensure that litigation funders certify, at regular intervals and at least once annually, that they remain in compliance with those paragraphs. Such a certification shall contain the opinion of a recognised national or international audit firm that the litigation funder is in compliance.
Amendment 227 #
Motion for a resolution
Article 9 – point 2
Article 9 – point 2
Amendment 235 #
Motion for a resolution
Article 10 – point 2
Article 10 – point 2
2. The Commission shall oversee and coordinate the activities of the supervisory authorities in performing the functions set out in this Directive, and shall convene and chair a network of supervisory authorities. The modalities for cooperation within the network shall be laid down and revised by the Commission by means of delegated acts , in close cooperation with the supervisory authorities.
Amendment 237 #
Motion for a resolution
Article 10 – point 3
Article 10 – point 3
3. The supervisory authorities may consult the Commission on any matter involving the implementation of this Directive. The Commission may issue guidelines, recommendations, best practice notices and advisory opinions to supervisory authorities on the implementation of this Directive, and in relation to any apparent inconsistency in this regard, or in relation to the supervision of any litigation funders. The Commission may also set up a centre of competence to provide qualified expertise to court or administrative authorities seeking advice on how to assess litigation funders’ activities within the Union.
Amendment 239 #
Motion for a resolution
Article 10 – point 4
Article 10 – point 4
4. Each supervisory authority shall communicate every quarteyear to the Commission a list of the commercial litigation funders it has authorised and make that list publicly available. Supervisory authorities shall inform the Commission each and every time there is a change to that list.
Amendment 241 #
Motion for a resolution
Article 10 – point 5
Article 10 – point 5
5. Each supervisory authorityMember State shall communicate every quarterthree years to the Commission and other supervisory authorities details of all decisions taken with regard to the supervision of litigation funders, including details of all decisions taken pursuant to Article 8(2)(b). Upon request from the Commission, Member States shall provide further details on particular cases.
Amendment 245 #
Motion for a resolution
Article 10 – point 7
Article 10 – point 7
7. Where a litigation funder is authorised by a supervisory authority in a Member State, but wishes to offer a third party funding agreement for the benefit of a claimant or other intended beneficiary in another Member State, or for proceedings in another Member State it shall notify the supervisory authority of the host Member State, and present proof of authorisation from its home Member Statpresent proof of authorisation from its home Member State supervisory authority upon request from the other Member State. In case a supervisory authority in that other Member State is aware of irregularities in the conduct of the litigation funder, it shall directly inform the responsible supervisory authority.
Amendment 246 #
Motion for a resolution
Article 11 – paragraph 1 – introductory part
Article 11 – paragraph 1 – introductory part
Amendment 249 #
Motion for a resolution
Article 11 – paragraph 1 – point -a (new)
Article 11 – paragraph 1 – point -a (new)
-a. the different costs and expenses that the litigation funder will cover;
Amendment 251 #
Motion for a resolution
Article 11 – paragraph 1 – point a
Article 11 – paragraph 1 – point a
a. the share of any award or fees that will be paid to the litigation funder or any other third party, or any other financial costs borne by the claimants and /or intended beneficiaries directly or indirectly both in absolute terms, and also modelled on a range of realistic outcomes given the facts then known about the claim;
Amendment 254 #
Motion for a resolution
Article 11 – paragraph 1 – point b – introductory part
Article 11 – paragraph 1 – point b – introductory part
b. the risks that the claimants and/or intended beneficiaries are assuming, including:circumstances in which the third-party funding agreement can be terminated.
Amendment 256 #
Motion for a resolution
Article 11 – paragraph 1 – point b – point i
Article 11 – paragraph 1 – point b – point i
Amendment 259 #
Motion for a resolution
Article 11 – paragraph 1 – point b – point ii
Article 11 – paragraph 1 – point b – point ii
Amendment 263 #
Motion for a resolution
Article 11 – paragraph 1 – point b – point iv
Article 11 – paragraph 1 – point b – point iv
Amendment 265 #
Motion for a resolution
Article 11 – paragraph 1 – point b a (new)
Article 11 – paragraph 1 – point b a (new)
b a. All other relevant elements that need to be included in possibly related service agreements, including, where relevant, financial service agreements in particular, under Union and national law.
Amendment 268 #
Motion for a resolution
Article 12 – point 1
Article 12 – point 1
1. Member States shall require litigation funders to establish a policy and to implement internal processes for the avoidance and resolution of conflicts of interest. That policy and those internal processes shall be appropriate to the nature, scale and complexity of the litigation funder’s business, and shall be set out in writing and made publicly available on the litigation funder’s website. Theyis information shall also be clearly statincluded in an annex to any third-party funding agreement.
Amendment 269 #
Motion for a resolution
Article 12 – point 2 – introductory part
Article 12 – point 2 – introductory part
2. Member States shall require litigation funders to disclose to a claimant and intended beneficiaries in the third- party funding agreement and the supervisory authority all information that may reasonably be perceived as having the potential to give rise to a conflict of interest. Required disclosures shall include at least the following:
Amendment 270 #
Motion for a resolution
Article 12 – point 2 – point a
Article 12 – point 2 – point a
(a) details of any arrangements that exist, financial or otherwise, between the litigation funder and any other undertaking that relates to the proceedings, including any arrangements with any relevant qualified entity, claims aggregator, lawyers, or other interested party;
Amendment 272 #
Motion for a resolution
Article 12 – point 2 – point b
Article 12 – point 2 – point b
Amendment 273 #
Motion for a resolution
Article 12 – point 2 – point c
Article 12 – point 2 – point c
(c) details of any relevant connection between the litigation funder and a defendant in the proceedings, in particular related to any competitive situations.
Amendment 275 #
Motion for a resolution
Article 13 – point 2 – introductory part
Article 13 – point 2 – introductory part
2. Member States shall ensure that third-party funders are not permitted to unduly influence, control or overrule the decisions of a claimant in the course of proceedings. To this end, any clause in third-party funding agreements granting a litigation funder the power to take or influence decisions in relation to proceedings shall have no legal effect. Any such clause or arrangement consisting of, inter alia, the following shall have no legal effect:
Amendment 276 #
Motion for a resolution
Article 13 – point 2 – point a
Article 13 – point 2 – point a
(a) the grant of an explicit power to a litigation funder to take or influencecontrol decisions in the course of proceedings against the will or interest of the claimant, such as with respect to specific claims pursued, settlement of the case, or management of expenses associated with the proceedings;
Amendment 277 #
Motion for a resolution
Article 13 – point 2 – point b
Article 13 – point 2 – point b
Amendment 278 #
Motion for a resolution
Article 13 – point 3 a (new)
Article 13 – point 3 a (new)
3 a. As the share of the compensation or damages payable to the litigation funder can be considered as an additional legal or procedural cost for the claimant, the competent court or administrative authority shall be allowed to decide to consider this as an additional charge to be compensated by the defendant in case the latter loses the case.
Amendment 279 #
Motion for a resolution
Article 13 – point 4
Article 13 – point 4
4. Absent exceptional circumstances, where a litigation funding agreement would entitle a litigation funder to a share of any award that would dilute the share available to the claimant and the intended beneficiaries to 670% or below of the total award (including all damages amounts, costs, fees and others expenses)compensation or damages award, such an agreement shall have no legal effect.
Amendment 286 #
Motion for a resolution
Article 15 – point 1
Article 15 – point 1
1. Member States shall ensure that claimants or their representatives are required to provide a complete and unredacted copy of any third-party funding agreements relating to the proceedings concerned to the relevant court or administrative authority at the earliest stage of those proceedingsthe relevant court or administrative authority can require claimants or their representatives to provide all parts of third-party funding agreements relating to the proceedings concerned that are necessary to assess the validity of the agreement. The third-party funding agreement shall not be accessible to the defendant.
Amendment 287 #
Motion for a resolution
Article 15 – point 2
Article 15 – point 2
Amendment 292 #
Motion for a resolution
Article 15 – point 3
Article 15 – point 3
Amendment 299 #
Motion for a resolution
Article 16 – paragraph 1 – point a
Article 16 – paragraph 1 – point a
(a) to make orders or give directions that are binding on a litigation funder, such as requiring the litigation funder to provide the funding as agreed in the relevant third- party funding agreement or requiring the litigation funder to make changes in respect of the relevant funding and, if necessary, rejecting the legal standing of the funded claimant, in particular, when the action is brought by a qualified entity, in accordance with Article 10, paragraph 4, of Directive (EU) 2020/1828 of the European Parliament and of the Council;
Amendment 303 #
Motion for a resolution
Article 16 – paragraph 1 – point c
Article 16 – paragraph 1 – point c
(c) to evaluate the suitability of each third-party funding agreement with respect to the transparency requirements under Article 12, taking in particular into account the level of clarity and transparency of the third-party funding agreement, and the degree to which any risks and benefits were presented to and knowingly undertaken by claimants or those intended beneficiaries represented by claimants;
Amendment 306 #
Motion for a resolution
Article 16 – paragraph 1 – point d – introductory part
Article 16 – paragraph 1 – point d – introductory part
(d) to assess whether a third-party funding agreement entitles a litigation funder to an unfair, disproportionate or unreasonable share of any award as described in Article 13(4), and to annul or adjust such agreements accordingly. Member States shall specify that in making such an assessment, competent courts or administrative authorities may take into consideration the characteristics and circumstances of the intended or ongoing proceedings including, as appropriate:
Amendment 314 #
Motion for a resolution
Article 16 a (new)
Article 16 a (new)
Article 16 a Qualification of the share of the compensation or damages As the share of compensation or damages payable to the litigation funder can be considered as an additional legal or procedural cost for the claimant, the competent court or administrative authority shall be allowed to decide to consider this as an additional charge to be compensated by the defendant in case the latter loses the case.
Amendment 317 #
Motion for a resolution
Article 17 – point 1 – introductory part
Article 17 – point 1 – introductory part
1. Where the claimant party has insufficient resources to meet adverse costs, Member States shall ensure that courts or administrative authorities are empowered to make cost orders against litigation funders, whether jointly or severally with claimants, following an unsuccessful outcome in proceedings. In such a case, courts or administrative authorities may require litigation funders to pay any appropriate adverse costs, having regard to: