In his recent article, “A Call for European Courts to Get Back on Track – Litigation Funding and Justice System Reform,” Kevin Demoulin, Chief Investment Officer at European litigation funder Deminor, argues that “an efficient justice system is a prerequisite for democracy.” We could not agree more. However, Demoulin makes several other comments with which we substantially disagree. For example:

1. “Funding improves access to justice.”
   • We agree that access to justice is a fundamental right that needs to be protected. However, access to justice should not be limited to an expensive entry ticket to the court system. It should be about securing a just and satisfactory outcome for all parties, including the claimants. Being for-profit businesses that do not have the same fiduciary obligations as lawyers, litigation funders prioritize their return on their investment, and not the welfare of claimants. Funders seek high returns, typically three to four times their investment in a single lawsuit – returns which often come at the expense of a lower payout to the claimants and higher costs of justice.  An egregious example of funders obtaining high percentages of the settlement occurred in the now well-publicized UK case Bates v. The Post Office, where the litigation funders and lawyers took a staggering 80 percent of the postmasters’ settlement (£57.5 million), leaving the claimants with a mere 20 percent, or about £20,000 per victim.
2. “We…see defendants using tactics that cause excessive and unnecessary delays which further increase the costs of litigation...”
   • Demoulin notably does not provide evidence to support his claims that defendants are the only parties interested in causing delays in the justice system. While there is minimal transparency around litigation funding practices, there is growing evidence that litigation funders play an active role in controlling claimants’ strategies and decision to pursue cases or to settle them. They can prolong or, in the alternative, abruptly shorten (by stopping funding) litigation. For example, in the U.S. Sysco Corp. v. Agri Stats case, Burford’s litigation funding agreement reportedly required its client Sysco to notify the funder of any settlement offer and prohibited acceptance without Burford’s consent. As we document in our Grim Realities research paper, Burford went on to enforce that requirement, preventing Sysco from settling its own litigation.
3. “It’s also in our own interest that litigation funding works properly, and that people have trust in what we do.”
   • We agree that people should have trust in what litigation funders do, however we fundamentally disagree on how it can be achieved. We believe that it’s in the interest of justice and litigants that litigation funding should be subject to appropriate safeguards. In setting those rules, European policymakers should consider some essential principles, including:
     • Full transparency of litigation funding agreements to the courts and litigants is essential. Courts must be empowered to verify who the real parties in interest are, how they are involved, and who will benefit from any judicial awards. Only by allowing courts and litigants to fully examine the content of litigation funding agreements can stakeholders rest assured that the usage of TPLF in a case does not raise any legal or ethical issues.
     • Litigation funders should not be allowed to direct cases. There is no ethical justification for allowing a third-party funder to wrest control of litigation away from a claimant seeking justice.
     • Claimants, particularly in consumer redress actions, should be protected from usurious loans and egregiously high percentages of any recoveries reserved to litigation funders. Funded parties should have the right to be paid first and in priority over funders. Caps on the share of recoveries should also be included in litigation funding agreements.
     • And with respect to all of these measures, courts should be empowered and expected to monitor TPLF activity in cases before them and enforce safeguards when TPLF agreements or funder activity cross the line.  
   • We are not alone in believing these safeguards are necessary. In Europe, for example, a recent study by the European Commission entitled “Mapping Third Party Litigation Funding in the European Union” found that 58% of stakeholders see the need for TPLF regulation. These safeguards would provide necessary consumer protection to prevent abuse of the justice system.