Third-Party Litigation Funding in Europe: A €1 Billion Market Waiting for Rules

Third-party litigation funding in the EU is a €1 billion market with approximately 300 active funders managing nearly 700 proceedings. No EU-wide regulation exists as of 2026, despite the European Commission's 700-page mapping study published in March 2025. Jurisdictional fragmentation — from Germany's 10% fee cap to Switzerland's minimal oversight — defines the landscape.

In September 2024, the Court of Justice of the European Union ordered Ireland to recover €14.3 billion from Apple in what became the largest state aid recovery in EU history. The case took over a decade to resolve. It consumed hundreds of millions in legal fees. And it raises an obvious question: who funds these kinds of cases?

The answer, increasingly, is third-party litigation funders — specialised investment firms that finance legal proceedings in exchange for a share of the recovery. The European litigation funding market now exceeds €1 billion. Approximately 300 active funders operate across the EU, managing nearly 700 tracked proceedings. Global projections put the market at over USD 50 billion by 2035. Yet as of March 2026, no EU-wide regulation governs the industry.

This gap matters. For claimants with meritorious cross-border disputes — particularly in state aid, competition, and regulatory enforcement — litigation funding is often the difference between pursuing a claim and abandoning it. Understanding how this market works, where it is heading, and what jurisdictional differences practitioners must navigate is no longer optional. It is fundamental to cross-border legal strategy.

The Regulatory Landscape: Fragmentation by Design

On 21 March 2025, the European Commission published a definitive mapping study on third-party litigation funding — a 700-page report conducted by the British Institute of International and Comparative Law (BIICL), Civic Consulting, the Asser Institute, and Risk & Policy Analysts. The study covered all 27 Member States plus the UK, Switzerland, the US, and Canada. It interviewed 84 national experts and surveyed 147 stakeholder organisations. The conclusion was notable for what it did not recommend: Commissioner Michael McGrath stated there is “no need” for immediate EU-level legislative intervention.

Instead, the Commission opted to monitor how Member States transpose the Representative Actions Directive (2020/1828), which entered force in 2023 and includes provisions on litigation funding in collective redress actions. The European Law Institute published its own principles in December 2024, recommending a light-touch approach and cautioning that prescriptive regulation could restrict access to justice.

The result is a patchwork. Germany caps funder success fees at 10% under the Verbraucherrechtedurchsetzungsgesetz (VDuG), entered into force in October 2023 — likely the strictest regime in the EU. The Netherlands, through its WAMCA framework, permits funding in all compensation cases but applies a proportionality test: Amsterdam District Court guidelines cap funder returns at 5x the amount invested. France adopted sweeping collective action reforms in May 2025, allowing third-party funding with transparency requirements but no explicit fee caps. Switzerland imposes minimal regulation — the Federal Supreme Court has expressly confirmed that litigation funding is “common practice” and the industry is not regulated as insurance under the Swiss Insurance Supervision Act.

The UK Disruption: PACCAR and Its Aftermath

The most significant single development in European litigation funding occurred in London. In July 2023, the UK Supreme Court held in PACCAR Inc v. Fishing and Allied Workers’ Union [2023] UKSC 21 that litigation funding agreements constituting percentage-share recovery arrangements qualify as damages-based agreements under the Courts and Legal Services Act 1990 — and are therefore unenforceable absent statutory exception. The decision sent shockwaves through the funding industry.

The Civil Justice Council published a final report on 2 June 2025 containing 58 recommendations for comprehensive reform, including a proposal to reverse PACCAR both prospectively and retrospectively. In December 2025, the Labour Government announced its intention to “mitigate the impact” of the PACCAR judgment. But as of March 2026, legislation has not yet been passed. The UK — historically Europe’s largest litigation funding market — remains in limbo.

For EU practitioners, this matters because PACCAR created an immediate competitive dynamic. Funders who previously concentrated in London are now evaluating continental European jurisdictions. The Netherlands and Switzerland, with their relatively permissive regimes, are natural beneficiaries. Germany’s 10% cap, by contrast, makes complex multi-jurisdictional cases economically unfundable in many scenarios.

Who Funds What: Market Structure and Key Players

The global litigation funding market is dominated by a small number of institutional players. Burford Capital, the largest legal finance company globally, has deployed USD 11.7 billion in cumulative commitments since inception and reports a 93% success rate on concluded matters. Its 2025–26 strategic focus includes Unified Patent Court (UPC) cases and life sciences IP disputes. Harbour Litigation Funding, the largest privately-owned funder, operates across 13 jurisdictions but reported increasing difficulty raising private capital in 2025, with investors demanding lower-risk deal structures. Therium, a pioneer in European funding since 2010, launched Therium Capital Advisors in October 2025 to provide independent advisory services for litigation finance structuring.

For continental Europe, Nivalion stands out as the only Swiss litigation funder licensed by FINMA as an asset manager — operating from offices in Steinhausen/Zug, Munich, Frankfurt, and Vienna. The FINMA license signals a level of regulatory oversight and capital adequacy that most funders do not face. Its model — a regulated asset management structure applied to litigation finance — may preview where the industry evolves as regulatory pressure increases.

What funders fund is as important as who they are. The BIICL study tracked approximately 700 proceedings across 23 major funders, with under 100 involving arbitration. Commercial litigation accounted for the largest share. Competition damages actions, funded under Directive 2014/104/EU, represent an established and growing category. The emerging growth areas include patent litigation at the UPC (operational since June 2023), appellate monetisation, and — increasingly — regulatory enforcement claims including state aid recovery.

The Access to Justice Argument — and Its Limits

The central justification for litigation funding is access to justice. Funders reject approximately 96.5% of applications — making this a highly selective market, not a blank cheque for speculative claims. For the cases that are accepted, funding eliminates the capital barrier that prevents meritorious claims from being pursued. This is particularly significant in cross-border disputes, where legal costs routinely exceed €200,000 and can reach millions in complex state aid or competition proceedings.

The European Parliament’s 2022 Resolution on responsible private funding of litigation — adopted 504 to 57 — acknowledged this access-to-justice function while calling for safeguards. The Resolution recommended mandatory disclosure of funder identity, court access to unredacted funding agreements, limits on unilateral funder withdrawal, and fee caps on funder recovery. These recommendations informed the Representative Actions Directive, which allows Member States to either permit or prohibit funding in collective actions, subject to conflict-of-interest protections.

The counter-arguments are serious. Consumer organisations and litigation funders favour light-touch or no regulation. Businesses and defendants favour comprehensive controls. The core concern is that funder incentives may diverge from claimant interests — particularly around settlement timing, where a funder may pressure early settlement to secure returns while the claimant could recover more through judgment. Conflicts of interest in multi-party disputes, where a single funder backs multiple claimants with potentially competing interests, remain inadequately addressed in most jurisdictions.

Implications for Cross-Border Claims Recovery

For anyone structuring cross-border legal claims in the EU, three developments deserve attention.

First, jurisdictional arbitrage is accelerating. The divergence between Germany’s 10% cap, the Netherlands’ proportionality test, and Switzerland’s near-total absence of restriction creates structural incentives for forum selection based on funding economics rather than purely legal merits. Practitioners structuring multi-jurisdictional claims must now factor in “fundability” as a jurisdictional criterion alongside applicable law and enforcement prospects.

Second, the Representative Actions Directive is creating new infrastructure. As Member States implement the Directive, national frameworks for collective claims are expanding. Litigation funding is the engine that makes these mechanisms functional for complex, capital-intensive claims. The interaction between Directive 2020/1828 and existing national frameworks — particularly WAMCA in the Netherlands and the new French collective action regime — is still being tested. Early results will shape funder appetite for years to come.

Third, the Commission’s decision not to regulate creates both opportunity and risk. The absence of EU-wide rules means the market will continue to grow with limited oversight. For claimants, this means more funding options. For funders, it means continued freedom to structure bespoke arrangements. But the lack of harmonisation also means that a funding arrangement perfectly lawful in one jurisdiction may face enforceability challenges in another — a risk that only compounds in cross-border proceedings.

The litigation funding market in Europe is no longer nascent. It is a €1 billion industry growing at double-digit rates, populated by institutional players managing hundreds of cases across every significant legal category. What it lacks is a coherent regulatory framework. For practitioners and claimants navigating cross-border disputes, the question is no longer whether litigation funding is relevant. It is how to use it effectively within a fragmented system — and what changes when the system eventually catches up.

Frequently Asked Questions

What is third-party litigation funding?
Third-party litigation funding is a form of legal finance where specialised investment firms finance legal proceedings in exchange for a share of the recovery. Funders assess case merit, cover legal costs, and bear the financial risk of losing. The European market exceeds €1 billion with approximately 300 active funders.

Is litigation funding regulated in the EU?
No EU-wide regulation governs litigation funding as of 2026. Regulation varies by Member State: Germany caps success fees at 10%, the Netherlands applies a proportionality test with a 5x investment return cap, France requires transparency but imposes no fee caps, and Switzerland has minimal regulation.

What was the PACCAR ruling and why does it matter?
In July 2023, the UK Supreme Court held that percentage-share litigation funding agreements are unenforceable as damages-based agreements. This disrupted the UK's position as Europe's largest litigation funding market, driving funders to evaluate continental European jurisdictions.

How much do litigation funders reject?
Funders reject approximately 96.5% of applications, making this a highly selective market. Accepted cases typically have clear legal merit, quantifiable damages, and sufficient recovery potential to justify the funder's investment.

What types of cases do litigation funders finance?
Primarily commercial litigation, competition damages actions, and patent litigation at the Unified Patent Court. Emerging areas include appellate monetisation, regulatory enforcement, and EU state aid recovery claims.

Related Analysis

This article is part of KDA & Partners' research on cross-border legal claims in the EU. For related analysis, see:

• EU State Aid Recovery: The €14 Billion Precedent and the Emerging Asset Class — how the Apple/Ireland ruling reshaped enforcement economics and why recovery claims are an investable asset class.
• Cross-Border Insolvency in the EU: What the Recast Regulation Actually Changed — COMI determination, group proceedings, and recognition mechanics under Regulation 2015/848.