EU Presses Pause on Regulating Third-Party Litigation Funding

The EU has paused regulation of third-party litigation funding, creating an inflection point for Ireland in charting its path forward. In parallel, the UK is advancing a light-touch regulatory framework. With Ireland’s Law Reform Commission report due to be published imminently, policymakers must now weigh the risks and rewards of legalisation, including Ireland’s competitiveness in the growing TPLF market. Our Financial Services team considers what the pause means for Ireland’s competitive position and how it could shape legislators’ choices in 2026 and beyond.

What you need to know

• The EU has paused TPLF regulation, leaving Ireland at a turning point as it considers the prospect of future legalisation
• The UK is advancing a light-touch regulatory framework, highlighting competitive and market opportunities for Ireland
• Ireland must balance competing views on legalisation, weighing competitiveness against access to a growing litigation-funding market

European Commissioner for Justice Michael McGrath has confirmed that the European Commission (EC) will not progress new legislation to regulate third-party litigation funding (TPLF). The announcement builds on the work of the High-Level Forum on Justice for Growth (HLF), an expert group established by the EC to explore using justice policy to promote competitiveness and growth in the EU.

This development concludes a body of work assigned to the EC by the European Parliament in its 2022 resolution on responsible private funding of litigation. The resolution called on the EC to submit a proposal for a Directive regulating TPLF in the EU, taking into account the effects of the Representative Actions Directive (RAD).

Scepticism

The HLF’s final report, published on 18 November 2025, summarises the discussions and insights raised by participants:

‘The participants in the High-Level Forum were very sceptical about the need to regulate the TPLF. The HLF broadly agreed that, at this stage, there is no demonstrated need for action at the EU level. Instead, the priority should be to gain experience by monitoring the application of the RAD in the field of consumer collective redress and possibly assessing the issue again after that … Those Member States where TPLF already finances domestic litigation reported no significant concerns warranting EU level intervention.’

Ireland is an outlier among EU member states in prohibiting TPLF on the grounds that it constitutes the ancient offences of maintenance and champerty. Maintenance is the funding of litigation in which the funder has no interest. Champerty is the funding of litigation in exchange for a share of the proceeds of that litigation. The implications and timing of the EC’s decision to pause progress on EU level regulation is significant. It means that any liberalisation of TPLF in Ireland, in the short term at least, will be a matter for Irish legislators driven by domestic policy choices, rather than pressure from Brussels. It arguably raises the stakes even higher for the outcome of the Law Reform Commission’s (LRC) review of TPLF expected next spring.

Conflicting perspectives

Interestingly, the EC’s decision departs from the recommendation of the European Banking Federation (EBF) and its industry partners, who in November 2024, endorsed the EP’s calls for an EU regulatory framework for TPLF. This was to be underpinned by values of transparency and integrity aimed at addressing the risks of speculative and abusive litigation.

However, restraint in the development of EU regulation will be welcomed by others. A March 2025 EC-commissioned mapping study on TPLF found that the draft EU directive accompanying the EP’s 2022 Resolution would be mostly workable in an Irish context. It cautioned, however, that the level of proposed EU regulation could stifle TPLF before it ever got off the ground. This is, for the time being at least, no longer a concern for those in favour of liberalisation.

The International Legal Finance Association (ILFA) recently welcomed the decision not to advance EU regulation, asserting that new rules would hinder access to justice for businesses and consumers, and increase uncertainty in the sector.

2025 in review: lessons and outlook

With momentum stalled at EU level and the LRC’s final report expected in early 2026, it is timely to review key non-EU developments on TPLF during 2025, which could influence Ireland’s way forward.

Judicial analysis

Two recent judgments of the Irish Superior Courts are worth highlighting. Neither case alters the long-standing prohibition on commercial TPLF, nor expresses any explicit weakening in judicial support for champerty-based challenges. That said, they illustrate how the Irish courts are willing to approach champerty objections in a principled, context-driven way. The cases also demonstrate how the courts will examine the underlying funding issues pragmatically rather than mechanically, anchored by public policy considerations.

• In Scully v Coucal Ltd[1], the Supreme Court rejected a champerty-based objection to enforcing a Polish judgment. The decision underlined the importance of comity and the public interest in upholding international judgments under established legal frameworks, even if ‘public policy would preclude something if done in Ireland.’

• In Campbell v O'Doherty T/A The Irish Light[2], the High Court dismissed a champerty argument as a basis to stop proceedings that had been crowdfunded via an online donation platform, noting the charitable motives of the funders. This aspect overcame any public policy concerns about litigation funding that lacked a ‘just cause or excuse’.

UK developments

A landmark Review of Litigation Funding published by the Civil Justice Council (CJC) in June 2025 set out a blueprint for regulated TPLF in the UK. Among the CJC’s 58 recommendations, which it said should be achieved through a single, comprehensive statute, are:

• The introduction of legislation ‘as soon as possible’ to reverse a 2023 Supreme Court judgment (PACCAR), which classified certain types of TPLF agreements as damages-based agreements (DBA), which were generally unenforceable under the relevant rules. According to the CJC, the legislation should make it clear that the provision of litigation funding is not a form of DBA or ‘claims management service,’ and should have both prospective and retrospective effect.
• The introduction of a comprehensive regulatory scheme for litigation funding, to be implemented in a ‘light touch’ way.

Growth, competitiveness and seizing opportunity

Another determining factor in the future of EU level regulation may be the extent to which the status quo can enable the EU to seize the opportunities presented by the anticipated growth in TPLF. This is particularly salient since growth and competitiveness have become established objectives across the EU’s economic, capital markets and legislative agendas this year.

The TPLF mapping study commissioned by the EC observed that the steady growth of TPLF in the EU is only expected to rise:

‘In 2019, it was estimated that the European TPLF market size represented approximately 0.8 % of the total revenue of the legal services market. This translates to approximately €1 billion from Member States. This portion is projected to rise in line with the global growth of TPLF…’

Indeed, Ireland’s ability to compete alongside its peers for the opportunities presented may be another consideration for domestic policymakers charged with progressing growth and competitiveness mandates at home. This is made more poignant given progress afoot in the UK to row back on PACCAR and situate TPLF within a responsible ‘light-touch’ regulatory framework.

EU regulation: still in play?

European Commissioner McGrath’s remarks in conjunction with the HLF’s final report have drawn a deliberate line under any immediate plans to progress EU level regulation. Despite this, HLF participants invited the EC to continue analysing the situation and gathering evidence, while keeping open the possibility of reassessment in the future. Should the EC’s plans to review the operation of the RAD unearth policy concerns, this could re-ignite the discussion about the need for EU level rules at a future date. Ultimately, with prevailing economic and geopolitical conditions especially fluid, the EU’s reluctance to progress the regulation of TPLF at the present time may prove temporary.

Conclusion – when one door closes…?

With the lens shifting away from EU regulation for now, the focus returns to domestic law and policy. It will be interesting to see how the LRC balances conflicting perspectives and policy considerations on the legalisation of TPLF in Ireland. These tensions were exemplified at our recent Dispute Resolution Conference in October. At the event, Minister for Justice Jim O’Callaghan expressed reservation about the introduction of TPLF in Ireland, describing his position as ‘very hesitant,’ and pointing to the risk of ‘commodifying justice.’

However, on balance, our panelists felt that Ireland should allow litigation funding in a controlled way especially for complex and collective claims, while ensuring robust oversight of costs, control, privilege and conflict issues.

With the dial now stuck at EU level, it is Ireland’s turn to look inward and consider whether the potential rewards of responsible legalisation of TPLF for ‘Ireland Inc.’ can outweigh the associated risks.

For more information and expert advice regarding competitive opportunities arising in the Irish market, contact a member of our Financial Services or Dispute Resolution teams.

This article was contributed by Barbara Parnell, Knowledge Lawyer.

The content of this article is provided for information purposes only and does not constitute legal or other advice.

[1] [2025] IESC 20

[2] [2025] IEHC 223