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Third party litigation funding Citation for published version (APA): Solas, G. M. (2017). Third party litigation funding: A comparative legal and economic analysis and the European perspective. Maastricht University. https://doi.org/10.26481/dis.20171108gms Document status and date: Published: 01/01/2017 DOI: 10.26481/dis.20171108gms Document Version: Publisher's PDF, also known as Version of record Please check the document version of this publication: • A submitted manuscript is the version of the article upon submission and before peer-review. There can be important differences between the submitted version and the official published version of record. People interested in the research are advised to contact the author for the final version of the publication, or visit the DOI to the publisher's website. • The final author version and the galley proof are versions of the publication after peer review. • The final published version features the final layout of the paper including the volume, issue and page numbers. Link to publication General rights Copyright and moral rights for the publications made accessible in the public portal are retained by the authors and/or other copyright owners and it is a condition of accessing publications that users recognise and abide by the legal requirements associated with these rights. • Users may download and print one copy of any publication from the public portal for the purpose of private study or research. • You may not further distribute the material or use it for any profit-making activity or commercial gain • You may freely distribute the URL identifying the publication in the public portal. If the publication is distributed under the terms of Article 25fa of the Dutch Copyright Act, indicated by the “Taverne” license above, please follow below link for the End User Agreement: www.umlib.nl/taverne-license Take down policy If you believe that this document breaches copyright please contact us at: [email protected] providing details and we will investigate your claim. Download date: 05 Oct. 2021 THIRD PARTY LITIGATION FUNDING A COMPARATIVE LEGAL AND ECONOMIC ANALYSIS AND THE EUROPEAN PERSPECTIVE 1 2 THIRD PARTY LITIGATION FUNDING A COMPARATIVE LEGAL AND ECONOMIC ANALYSIS AND THE EUROPEAN PERSPECTIVE Dissertation To obtain the double degree of “Dottore di Ricerca in Diritto dei Contratti” at the University of Cagliari and Doctor at Maastricht University On the authority of the Rectores Magnifici, Prof. Maria Del Zompo and Prof. dr. Rianne M. Letschert in accordance with the decision of the Board of Deans, to be defended in public on Wednesday 8th of November 2017, at 14.00 hours in Maastricht by Gian Marco Solas This thesis was written under a joint degree program supervised by the University of Cagliari and Maastricht University 3 Supervisors: Prof. dr. Michael Faure. Maastricht University; Erasmus School of Law, Rotterdam Prof. Annamaria Mancaleoni. University of Cagliari Committee members · Prof. dr. N.J. Philipsen, Chairman. Maastricht University; Erasmus School of Law, Rotterdam · Prof. dr. A. Ogus. Maastricht University · Prof. mr. W.H. van Boom. Leiden University · Dr. J. de Mot. Ghent University · Prof. D. Scano. University of Cagliari · Prof. R. De Lisa. University of Cagliari 4 To my family, girlfriend and friends For their irreplaceable love and support 5 6 Contents List of abbreviations … 15 Acknowledgements … 17 Chapter 1 Introduction … 21 1. Background … 21 2. Problem definition and basic terminology … 25 2.1. Third Party Litigation Funding … 25 2.2. Funding litigation in the civil law and in the common law jurisdictions: limits and possibilities … 26 2.3. Alternative Litigation Funding … 28 2.4. The litigation market and the litigious rights as property … 30 2.5. TPLF in relation to a market failure in access to justice and to externalities … 32 3. Structure, research questions and methodology … 34 3.1. Part I - Is there a TPLF market phenomenon? Is TPLF legal? The need for a comparative legal and factual analysis … 34 3.2. Part II - If there is a TPLF market phenomenon, why and how has it emerged? How does/could it work in the private and societal dimensions? The need for a legal and economic analysis … 35 3.3. Part III - If TPLF would be legal and desirable, why is it not largely used? The need for a legal and economic assessment of TPLF in a specific legal context … 37 PART I THIRD PARTY LITIGATION FUNDING: A COMPARATIVE LEGAL ASSESSMENT … 41 Chapter 2 An Historical Overview … 41 7 1. Meddling in litigation in the early civil law and common law jurisdictions … 42 1.1. Ancient Greece … 43 1.2. Ancient Rome … 43 1.2.1. The institutionalisation of the legal profession and the prohibition on the pactum de quota litis … 44 1.2.2. Claim purveyors and the limits to the redemptio litis … 45 1.3. Meddling in litigation in medieval England. Maintenance and champerty … 49 2. From the establishment of the rule of law to the recent financial crisis … 51 2.1. Judicial independence and the rule of law in common law jurisdictions … 52 2.2. The age of codifications: reiteration of the prohibitions of Roman origin … 53 2.3. Access to justice in the United States and the first concerns regarding the prohibitions to fund litigation … 56 2.4. Legal aid and the first waivers to the prohibitions to fund litigation … 57 2.5. The impact of globalization and of the financial crisis on access to justice and dispute resolution … 60 3. Concluding remarks: a fast growing TPLF (and litigation) market … 64 Chapter 3 Third Party Litigation Funding: A Comparative Legal Analysis … 67 1. TPLF in the common law jurisdictions … 68 1.1. Australia … 68 1.1.1. Champerty, maintenance and the Fostif case … 69 1.1.2. Local regulation and TPLF … 71 1.2. Canada … 73 1.2.1. Common law vs. civil law and the institutional debate … 74 1.2.2. TPLF and Canadian class actions … 76 1.3. England and wales … 80 1.3.1. From the Criminal Law Act of 1967 to the reforms of justice of the 1990’s and 2000’s. Paving the way for TPLF … 81 8 1.3.2. Arkin and other case law shaping the practice of TPLF … 83 1.3.3. Some regulatory indications from the Jackson report and the association of litigation funders’ voluntary code of conduct … 86 1.3.4. Post-Jackson reforms and their impact on TPLF … 88 1.4. The United States … 90 1.4.1. The US legal and litigation finance market … 92 1.4.1.1. Consumer legal funding … 95 1.4.1.2. Finance for law firms … 98 1.4.1.3. Commercial TPLF … 98 1.4.2. TPLF vs contingency fees in US mass claims … 101 2. TPLF in (European continental) civil law jurisdictions … 103 2.1. Germany … 104 2.2. Switzerland … 106 2.3. Austria … 107 2.4. Belgium … 107 2.5. The Netherlands … 108 2.6. France … 110 2.7. Other (European continental) civil law jurisdictions … 111 3. Concluding remarks. Legality of TPLF … 111 3.1. Legality of TPLF in the common law jurisdictions … 112 3.2. Legality of TPLF in the civil law jurisdictions … 113 PART II A LEGAL AND ECONOMIC ANALYSIS OF THIRD PARTY LITIGATION FUNDING IN THE LITIGATION MARKET … 115 Chapter 4 The Emergence of the Litigation Market and Third Party Litigation Funding … 117 1. Property rights and litigation … 118 1.1. Property rights and litigation in the liberal states … 119 1.2. Property rights and litigation in the welfare states … 122 1.3. Property rights and litigation in the post-welfare states … 124 1.3.1. The liberalisation of the litigation market. Litigious rights as property … 126 9 1.3.2. Other global trends affecting access to justice and dispute resolution … 130 1.3.3. The financial crisis and the market failure in access to justice … 134 1.3.4. The sharing economy and TPLF … 136 2. The actors in the litigation market and their modus operandi … 137 2.1. Third party litigation funders … 138 2.1.1. Passive vs active TPLF … 140 2.1.1.1. Passive TPLF schemes … 142 2.1.1.1.1. One-off claim funding … 143 2.1.1.1.2. Claim portfolio funding … 144 2.1.1.1.3. Law firms’ funding … 145 2.1.1.1.4. Insurance type funding …146 2.1.1.2. Active TPLF schemes … 146 2.1.1.2.1. Transfer of claims for consideration or purchase …150 2.1.1.2.2. Partial transfer of claims … 151 2.1.1.2.3. Conditional transfer of claims … 151 2.1.1.2.4. Transfer of a potential claim … 152 2.1.1.2.5. Claims’ transfer and aggregation … 152 2.1.1.2.6. Claims’ securitisation … 153 2.1.1.3. Potential conflicts in the control over litigation …154 2.1.1.3.1. Conflicts related to the strategies employed to pursue the claim …156 2.1.1.3.2. Conflicts related to offers of settlement …156 2.1.1.3.3. Conflicts related to offers of settlement other than by way of cash …157 2.1.1.3.4. Conflicts related to the withdrawal of proceedings. … 157 2.1.1.3.5. Conflicts related to the access and use of confidential information … 157 2.1.1.4. Other contractual issues concerning TPLF … 158 2.1.1.4.1. A glance to a specific case: the Chevron/Ecuador dispute. … 158 2.1.1.4.2. The client-lawyer-funder-insurer relationship. … 160 2.2. Lawyers’ funding … 162 2.2.1. Arrangements on the lawyers’ fees based on success … 163 2.2.2. Other lawyers’ funding transactions … 165 2.2.3. Lawyers’ funding vs TPLF … 167 2.3.
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