The landscape of litigation funding in Europe remains relatively stable, even as debates over disclosure requirements create divisions among stakeholders in the United States. This was a key takeaway from a recent forum held at New York University School of Law, where experts convened to discuss the European Law Institute’s September report on third-party funding.
The report, titled *Principles of Governing the Third Party Funding of Litigation*, aims to provide a comprehensive framework for regulating this rapidly growing industry, emphasizing the importance of access to justice. Participants discussed the need for transparency and fairness in international disputes, highlighting concerns about how third-party funding can impact legal proceedings.
Professor Susanne Augenhofer from the University of Innsbruck noted that while transparency is crucial, it should focus on disclosing the identity of funders rather than the specifics of funding agreements. “We support disclosure regarding who the funder is and that a third-party funder is involved,” she stated during the panel.
In contrast, representatives from U.S. business organizations like the U.S. Chamber of Commerce have voiced concerns about the lack of disclosure in litigation funding agreements. Scevole de Cazotte from the Chamber praised the European Law Institute for addressing this issue, stressing that clarity about funding sources is essential to prevent potential misuse, including money laundering.
Panelist Susie Kim from Parabellum Capital argued against a uniform regulatory approach, asserting that regulations should be tailored to address specific needs rather than imposing unnecessary restrictions. She countered claims that litigation funding encourages frivolous lawsuits, asserting that funders are incentivized to support legitimate claims and often promote early resolutions.
The discussion also extended to third-party funding in international arbitration, with NYU Professor Franco Ferrari highlighting risks associated with confidentiality. He warned that while funders require sensitive information, sharing such details could lead to conflicts of interest and misuse.
Professor Anthony Sebok from Cardozo School of Law observed that while the litigation funding industry continues to grow steadily, ongoing debates underscore the necessity for further examination and regulation.
This forum followed a previous discussion hosted by NYU’s Center on Civil Justice, which focused on legislative efforts in the U.S. aimed at clarifying disclosure requirements for third-party funding agreements.
The European Law Institute’s report seeks to encourage jurisdictions worldwide to adopt its principles, addressing transparency deficits and power imbalances in litigation funding negotiations. The institute emphasizes that these challenges are not unique to Europe and advocates for global fair practices in litigation funding.
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