In November 2025, European Commissioner Michael McGrath announced that the European Commission would not proceed with legislation on third-party litigation funding.1 The decision followed three years of institutional work. The European Parliament had passed a resolution calling for regulation by an overwhelming majority in September 2022.2 The Commission had funded a comprehensive mapping study covering all twenty-seven Member States and four non-EU jurisdictions, published in March 2025.3 That study identified, from stakeholder evidence, close to 300 entities active in litigation funding across the EU, while also noting limited market visibility and the absence of any official registry. The question for the industry is what the absence of harmonisation produces in practice.
The Evidence Base the Commission Built
The BIICL mapping study was not a superficial exercise. It drew on national reports, national interviews, a broad stakeholder consultation and an expert panel. It presented three regulatory approaches: no regulation, light-touch regulation and stricter regulation. The Parliament’s 2022 Resolution had already set out a detailed framework. It called for an authorisation system for funders, an obligation to act in the best interests of claimants without undue control over proceedings, minimum capital requirements, a prohibition on abandoning funded claimants and a rule that at least 60% of gross settlement or damages should go to claimants.4
The vote was 504 to 57. That margin is difficult to dismiss as political theatre. Yet the Commission, having received the evidence it commissioned, opted not to act. The stated rationale was that the High-Level Forum on Justice for Growth, convened in 2025 to facilitate strategic discussions on EU civil and company law, had expressed marked scepticism about the need to regulate beyond what was already provided for in the Representative Actions Directive. Forum participants broadly agreed that, at that stage, there was no demonstrated need for EU-level action. The Commission would instead prioritise monitoring the application of the Directive in the field of consumer collective redress.5
What the Representative Actions Directive Does Not Cover
The Representative Actions Directive entered into force in December 2020 and began to apply at national level on 25 June 2023.6 It permits qualified entities to bring representative actions on behalf of consumers for injunctive and redress measures. It also imposes safeguards where Member States allow third-party funding in such actions: conflicts of interest must be prevented, and the funder must not divert the action away from the collective interests of consumers. What it does not do is create a general regulatory regime for litigation funders across civil litigation. It addresses who may bring representative actions and some safeguards around how those actions may be financed. It does not create an EU-wide framework governing funder authorisation, capital adequacy, returns, withdrawal rights or control across the broader litigation market.
The Jurisdictional Fragmentation That Remains
The Commission’s decision preserves a regulatory landscape in which each Member State takes its own approach. Germany permits litigation funding, but in redress actions falling within the RAD framework it caps the funder’s share at 10% of the gains. The Commission’s own mapping study noted that this makes commercial TPLF highly unlikely in that segment.7 The Netherlands, by contrast, has the most developed funding market in the EU. Its 2020 WAMCA enables opt-out collective damages actions, and available studies indicate that WAMCA damages claims have in practice been heavily reliant on external commercial funding.8 The Dutch Revised Claim Code of 2019 codified minimum standards for the relationship between claim organisations, funders and injured parties.
Ireland remains the European outlier. Litigation funding is prohibited under the doctrines of maintenance and champerty, which survive in Irish law as both tort and criminal offence. A narrow statutory exception for international commercial arbitration was enacted in 2023 but has not yet been commenced.9 The practical effect is that Irish claimants who cannot self-fund remain largely shut out of commercial litigation finance. The Law Reform Commission is expected to report on third-party litigation funding in late spring 2026. France, meanwhile, moved in 2025 from near-silence to express regulation of third-party-funded class actions. Article 16 of Law No 2025-391 reworked the class action framework, and Decree No 2025-1191 added transparency obligations designed to prevent conflicts of interest in the conduct of group actions.10 Spain’s Organic Law 1/2025 took a different route entirely, introducing mandatory use of an appropriate ADR mechanism as a procedural prerequisite in a broad category of civil proceedings.11.
The Forum Shopping Consequences
This fragmentation is not neutral. It creates incentives. Cross-border product liability and consumer claims will tend to concentrate in jurisdictions with the most favourable combination of collective action rules, costs regimes, funding availability, expected damages and procedural duration. Within the EU, that pushes attention toward the Netherlands and, in some segments, Germany; in a wider European disputes context, England remains an obvious comparative point. Funders establish themselves where restrictions are lightest. Claimant platforms aggregate cases across borders and file where the economics work best. The absence of harmonisation produces not a neutral coexistence of national systems but a competitive dynamic in which jurisdictions that facilitate funded litigation attract claims and those that restrict it export disputes or suppress them altogether.
The January 2026 joint statement from a cross-sector group of business associations made precisely this point.12 It called for binding EU-level safeguards including joint liability for adverse costs, minimum capital requirements, prohibition of funding arrangements involving conflicts of interest, caps on funder and intermediary fees and harmonised rules across mass litigation and arbitration. The funding industry’s position is different. It generally supports proportionate, light-touch regulation that provides legal certainty and a level playing field without imposing barriers that reduce access to justice. The Commission had before it the Parliament’s 2022 Resolution, the BIICL mapping study and continued calls from market participants and critics alike for greater clarity. It chose to wait.
The UK Moves in the Opposite Direction
The divergence between the EU and the UK could not be starker. The Civil Justice Council published its review of litigation funding in June 2025 and, in December 2025, the UK Government announced its intention to accept the two primary recommendations: legislation to reverse the effect of PACCAR prospectively by clarifying that litigation funding agreements are not damages-based agreements and the introduction of proportionate regulation of LFAs.13 The UK is therefore on a clearer regulatory trajectory than the EU, even though the legislation itself is still to come.
For funders operating across both jurisdictions, this creates a compliance asymmetry. UK operations will increasingly need to align with whatever statutory framework emerges from the CJC recommendations and the Government’s response. EU operations, by contrast, remain subject to a patchwork of national rules ranging from outright prohibition in Ireland to a comparatively permissive and mature market in the Netherlands, with important sector-specific constraints in Germany and more recent transparency-based controls in France. For defendants facing parallel claims in both jurisdictions, the coordination challenge is obvious. Funding dynamics, disclosure obligations and funder accountability will not be aligned on either side of the Channel.
What Happens Next
The Commission has not closed the door permanently. Commissioner McGrath framed the decision as one of timing, not principle. The Commission will monitor the application of the RAD and reassess if necessary. But the litigation funding market is not static. The mapping study points to a growing and still only partially visible market. Cross-border collective actions are increasing. Claimant aggregation platforms in jurisdictions such as the Netherlands are unlikely to remain domestically confined. Every year without harmonisation entrenches the fragmentation and makes any eventual intervention more disruptive when it arrives.
The cost of inaction is measured in the claims that cannot be brought in Ireland, the consumer actions that are less likely to attract commercial funding in Germany and the cross-border disputes that settle on terms shaped by jurisdictional arbitrage rather than by a coherent regulatory framework. The EU had the evidence, a parliamentary mandate to consider legislation and demands from both supporters and critics of litigation funding for greater clarity. It chose to defer. The funding industry will adapt, as it always does. The claimants who fall through the gaps of a fragmented system will not adapt so easily.
Notes
1. Report of the High-Level Forum on Justice for Growth, 18 November 2025, pp 7–8.
2. European Parliament, Resolution of 13 September 2022 on responsible private funding of litigation (2020/2130(INL)); adopted by 504 votes to 57, with 65 abstentions.
3. European Commission, ‘Third-Party Litigation Funding (TPLF)’ webpage; Final Report EC Mapping TPLF in the EU, 21 March 2025. The study covered the 27 Member States and four non-EU jurisdictions.
4. European Parliament Legislative Train Schedule, Responsible third-party funding of civil litigation, summarising the elements requested in the 2022 resolution.
5. Report of the High-Level Forum on Justice for Growth, 18 November 2025, Subtopic 1.2: Third-party litigation funding, paras 24–32.
6. European Commission, Representative Actions Directive webpage; Directive (EU) 2020/1828.
7. European Commission / BIICL, Mapping Third Party Litigation Funding in the European Union, national report and synthesis passages on Germany noting the 10% cap and that it makes TPLF highly unlikely in RAD redress actions.
8. WAMCA (Settlement of Large-scale Losses or Damage (Class Actions) Act, 2020); Dutch WODC study on financing collective actions, stating that collective actions seeking damages under WAMCA rely on commercial third-party funding.
9. Courts and Civil Law (Miscellaneous Provisions) Act 2023, s 124 inserting s 5A into the Arbitration Act 2010; Irish Statute Book commencement table noting ‘not yet commenced’.
10. France: Law No 2025-391 of 30 April 2025, art 16; Decree No 2025-1191 of 10 December 2025, including transparency obligations in relation to third-party financing of group actions.
11. Spain: Organic Law 1/2025 on Measures to Improve the Efficiency of the Public Justice Service, entered into force 3 April 2025.
12. Joint Statement: Renewed Call for Proportionate EU-level Action on Professional Third-Party Litigation Funding, 21 January 2026.
13. Civil Justice Council, Review of Litigation Funding (2 June 2025); UK Parliament written statement HCWS1192 and GOV.UK announcement of 17 December 2025.
References
EU and UK official sources
• European Commission, Report of the High-Level Forum on Justice for Growth (18 November 2025)
• European Commission, ‘Third-Party Litigation Funding (TPLF)’
• European Commission, ‘Representative Actions Directive’
• European Parliament, Resolution of 13 September 2022 on responsible private funding of litigation (2020/2130(INL))
• European Parliament Legislative Train Schedule, Responsible third-party funding of civil litigation
• Directive (EU) 2020/1828 on representative actions
• UK Parliament, Written Statement HCWS1192 (17 December 2025)
• Civil Justice Council, Review of Litigation Funding (2 June 2025)
National legislation and regulatory materials
• Germany: Verbraucherrechtedurchsetzungsgesetz (VDuG, 2023)
• Netherlands: WAMCA (2020); Dutch Revised Claim Code 2019
• Ireland: Courts and Civil Law (Miscellaneous Provisions) Act 2023; Irish Statute Book commencement table for Arbitration Act 2010, s 5A
• France: Law No 2025-391, art 16; Decree No 2025-1191 of 10 December 2025
• Spain: Organic Law 1/2025
Studies and commentary
• European Commission / BIICL, Mapping Third Party Litigation Funding in the European Union (21 March 2025)
• Dutch WODC study on financing collective actions under the WAMCA
• Joint Statement: Renewed Call for Proportionate EU-level Action on Professional Third-Party Litigation Funding (21 January 2026)
No responses yet