Third Party Litigation Funding: Purchasinga Contentious Claim as a Form of Investment

This paper analyzes the institution of third party litigation funding, which is virtuallyunknown in Romanian law but is constantly evolving and frequently used in other states.This institution refers to cases in which a specialized funding company provides funds toa party that pursues a financial claim against another party in a national or cross-borderlitigation or arbitration case so that upon the successful conclusion of the case the fundergets a share of the damages awarded to the funded party. The issue of litigation fundingis not a new one. However, using third parties to fund the pursuit of financial claims is arelatively new phenomenon, increasingly common in the world of litigation. This fast-paced growth – from a procedure specific only to certain areas of practice and certainjurisdictions to a phenomenon that has become a part of everyday activities – hasmotivated us to analyze and explore the way in which third party litigation funding works,focusing on elements related to the contentious claim as a financial asset and itspurchasing by the professional funder as a form of investment, on the stages leading tothe formation of the parties’ – the funder and the beneficiary – binding decision, as wellas on the actual content of the funding agreement. Among the issues debated in relationto this institution there stand out the recent European Parliament resolution of 13September 2022 with recommendations to the Commission on Responsible private fundingof litigation, as well as the draft Directive annexed to the Resolution, which could lead toa considerable increase in the use of third party litigation funding in Europe.Keywords: investment; litigation; finance.