Third-party litigation funding (TPLF) continues to expand beyond the United States and into the European Union. Also known as litigation financing, TPLF involves outside investors funding a lawsuit in exchange for a share of any recovery. We have previously written about the growing role of funders in shaping complex litigation. As consumer and product liability actions gain traction across Europe, policymakers are taking a closer look at the transparency, oversight, and potential conflicts of interest associated with TPLF.

Most EU Member States lack specific regulatory framework governing TPLF and disclosure of funding arrangements to courts or opposing parties is generally not required. The closest form of regulation is the “Representative Actions Directive” (Directive (EU) 2020/1828), which was implemented in June 2023. The Directive spans many sectors and its purpose is to establish safeguards against abusive litigation. Article 10 addresses TPLF by requiring Member States ensure conflicts of interest are prevented and that funders do not divert proceedings away from the protection of the collective interests at stake.

In March 2025, the European Commission published Mapping Third Party Litigation Funding in the European Union, which surveyed the legal frameworks across Member States and select non-EU jurisdictions. The report confirmed that TPLF is widely used and identified nearly 300 active funders operating across the EU. However, data remains limited, largely because disclosure of funding arrangements is rarely required in most proceedings.

A comparison of TPLF practices in the EU and the United States reveals familiar funding structures:

1. Funders typically receive 20–30% of any recovery and/or a multiple of invested capital.
2. “Waterfall” provisions prioritize repayment of the funder before proceeds are distributed.
3. Agreements often give funders significant influence over settlement decisions, litigation strategy, and, in some cases, the ability to terminate funding during the proceedings.

In loser-pays systems, funders are generally not automatically liable for adverse cost awards, though agreements may address cost exposure contractually.

Supporters contend that TPLF increases access to justice. Opponents warn of undue funder control, conflicts of interest between lawyers and funders, and the potential for litigation to be strategically coordinated across jurisdictions. Across many jurisdictions, disclosure requirements are increasingly viewed as the most practical regulatory response. As TPLF continues to develop both domestically and abroad, we will continue to monitor these trends and their implications.