knowledge 18 December 2025 |

EU Hits Pause on Third‑Party Litigation Funding: What’s Next?

The European Commissioner for Democracy, Justice, the Rule of Law and Consumer Protection, Michael McGrath has confirmed that the European Commission will not progress the regulation of TPLF.  This comes following the publication of the Report of the High-Level Forum on Justice for Growth where it is noted that the participants in the Forum were “very sceptical” about the need to regulate TPLF, and that at this stage there is “no demonstrated need for action at the EU level” and instead priority should be “to gain experience by monitoring the application of the [Representative Actions Directive] in the field of consumer collective redress and possibly assessing the issue again after that.”

This announcement also comes following the release of the European Commission’s study on Mapping Third Party Litigation Funding in the EU (the “Study”) discussed in our briefing here.  The Study analysed the position of TPLF across EU Member States, including Ireland, and selected third countries (Switzerland, UK, USA and Canada).

Position in Ireland

In Ireland, save for limited exceptions, TPLF is prohibited.  In Persona Digital Telephony Ltd v Minister for Public Enterprise¹ a majority of the Supreme Court confirmed that the ancient torts and offences of maintenance and champerty remained part of the common law in Ireland.  The effect of this is that it is generally unlawful to enter into a third-party funding agreement in this jurisdiction.  While the Supreme Court has emphasised² that the law regarding maintenance and champerty is developing in a way that has narrowed the “forbidden areas”, their stated preference is that the legislature should intervene. 

What does this mean for Ireland?

If the EU had regulated TPLF on an EU wide basis, Ireland would have been obliged to give effect to any such regulation.  Now, any relaxation of the existing prohibition against TPLF in Ireland and the regulation of TPLF will be a matter for the Irish legislator.

In that regard, the Law Reform Commission’s report on TPLF is expected in late Spring 2026, where it will consider and potentially put forward recommendations in relation to the regulation of TPLF.  However, even if the Law Reform Commission recommends legislative action in this area, it appears from Ministerial statements to date, at least, that there may be reluctance on the part of Government to relax the prohibition and regulate TPLF in Ireland. 

A continued prohibition on TPLF in Ireland is in marked contrast to the position in the UK where TPLF is a feature of litigation and arbitration.  In the final report of the Civil Justice Council (“CJC”) in the UK, published on 2 June 2025, the CJC detailed numerous recommendations for reform of TPLF in the UK including the introduction of light touch regulation with a minimum ‘base-line’ set of regulatory requirements applying to litigation funding generally and the reversal of the PACCAR 2023 decision. This decision characterised litigation funding agreements whereby the funder is entitled to a percentage of damages as “damage-based agreements” therefore subject to DBA regulations, effectively making many litigation funding agreements unenforceable in the UK.  In a statement from the UK Ministry of Justice on 17 December 2025 the UK Government announced its intention to legislate to reverse the PACCAR 2023 decision and “implement proportionate regulation of third-party litigation funding agreements…”

In Ireland, two statutory reforms to the law on TPLF have been placed on the statute book, namely the use of TPLF in international commercial arbitrations (which has not yet been commenced) and representative actions on behalf of consumers if TPLF becomes legal.  With the European Commission now hitting pause on the introduction of an EU-wide regulatory framework for TPLF and given the apparent Ministerial reluctance to relax the prohibition and regulate TPLF, it may be that following the Commission’s announcement there will be little legislative development in this area in the short term and any further development of the law will continue to be a matter for the Courts.