Europe’s share of litigation funding market set to grow as ESG and human rights fuel cases, report finds
UK and Europe will take 16% slice of $18bn global market according to research by funder Deminor
Europe’s share of the global litigation funding market is projected to reach nearly 16% of a total of $18bn by 2025, according to new research.
Litigation Funding from a European Perspective, by Brussels-based litigation funder Deminor, noted that there were no precise figures for the size of the global litigation funding market but estimated that the UK contributed around $1bn to a global addressable market of around $11.2bn as of 2020.
Europe, meanwhile, had a market of around $0.8bn, with Germany’s $230m market the largest. Ann-Christin Richter, of Hausfeld’s Berlin office, said the specialist disputes law firm had seen “a constantly growing demand for and acceptance of" litigation funding in the last ten years, including from big corporates.
Deminor CEO, Erik Bomans, said that while the US market remained four times as large as Europe’s, the potential for growth was there, noting funding was “not an exclusively Anglo-Saxon phenomenon”.
“For at least two decades, litigation funding has been practiced in Continental Europe and there is a well-established and mature practice in European securities actions,” he said.
The report forecasts that while the EU market is still relatively small, the increase in the use of litigation funding is expected to hit annual growth of 8.3% in the next five years.
Growth in funding, Bomans said, would create a shift in perception as to “consumers’ ability to successfully resolve legal disputes that otherwise wouldn’t be accessible to them.”
According to the report those disputes would be fuelled by economic uncertainty, rising cost of living and societal shifts, centred around non-compliance with ESG standards, human rights and general consumer rights.
“Given economic uncertainty, we anticipate that the market will shift towards businesses using the funding to be smarter with capital and release money that would otherwise have been tied up in litigation,” Bomans said. “This is also likely to lead to more successful litigation outcomes where businesses can benefit from the knowledge of experts in the field.”
EU legislation, he added, would also enable greater use of class actions and any associated funding, with both Germany and the Netherlands pushing the adoption of the forthcoming European Representative Action Directive, which will make collective actions available in all EU countries by the end of 2022.
“Regulation will certainly be needed to create more certainty and transparency in the market, with both European and national governments introducing measures to protect market competition. The goal however is to give consumers and smaller companies litigation options to support justice, to champion social progress and to restore balance,” Bomans said.
Hausfeld’s London managing partner, Lianne Craig, said that, like Deminor, Hausfeld had seen opportunity for collective actions across a growing range of European jurisdictions.
“Funder interest has been increasing significantly in terms of looking to finance claims in jurisdictions that were perhaps not on their radar before such as Spain, Portugal and Italy”, she added, with implementation of the Directive likely to fuel such trends.
Hausfeld’s Ritcher agreed, saying that: “Antitrust damages, data breach and securities litigation will most certainly continue to chart an upwards trend across Europe,” although both she and Craig noted the significant gap on ESG claims jurisdictionally, with courts in the Netherlands and Germany much more receptive to rights-based claims in the climate space than common law jurisdictions.
Craig added that while the scope to bring viable damages claims was “still quite a way off” for funders, any appetite amongst funders to take on more of a role was welcome.
“At the moment, however, we do not see very much evidence of a desire on the part of funders to bring about social change. It is philanthropic funders and NGOs taking on the financing needs of the ‘frontier’ cases being brought at present with law firms often acting pro or ‘low-bono’.”
Craig added that with the recent launch of the European Association of Litigation Funders as a collective voice of the industry, the role of European funders would be given added weight, not least because of what she called “the ongoing ferocity of corporate lobbying against European developments to enhance consumer rights through the introduction of collective actions”, particularly by US lobbyists.