Controlling Third-Party Litigation Funding in the EU: The Regulative Force of Soft Law

The question of how to regulate third party litigation funding (TPLF) presupposes a series of interwoven and underlying questions that ask which regulatory framework is best capable of promoting access to citizens’ justice, ethically regulating the conduct of funders, and protecting funders and beneficiaries so as to foster confidence in theTPLF mechanism. The first issue is whether to even impose regulation. The US and EU have common concerns and exhibit a certain hostility towards TPLF. Although all anti-TPLF arguments must be addressed carefully, no single argument is particularly rigorous or insurmountable. Conversely, there is evidence regarding the positive effects that TPLF might have on the civil justice system, mainly in improving access to courts. When discussing whether some kind of TPLF control is needed, the range of options goes from a certain inertia (taking no action at all) to prohibition, with various options of moderate or more rigorous regulation falling in-between. Considering that neither a preservation of the status quo nor the total restriction model is a workable answer, one is left to conclude that some kind of intervention is needed. The second issue, then, is just how to regulate. This can also be broken down into a chain of questions, each fraught with difficulty. What would be the rationale behind legal intervention? Would it be better to design strong-mandatory regulation or soft regulation? And if the latter were deemed the more appropriate choice, would mere self-regulation be preferable to co-regulation?