IDEAS home Printed from https://ideas.repec.org/p/zbw/safewp/341093.html

Regulating third-party litigation funding? Weighing the arguments in the light of extant EU consumer protection safeguards

Author

Listed:
  • Morell, Alexander
  • Schellenberg, Daniel

Abstract

This paper cautions against the use of consumer protection as a Trojan horse for broader regulation of third-party litigation funding (TPLF) in the EU. The EU already operates a uniform consumer protection framework that prevents adverse outcomes for consumers across the board, including legal services. Section II evaluates a selection of arguments commonly advanced in the debate on regulating TPLF. It reviews frequently invoked concerns and demonstrates why they are unlikely to materialize, suggesting that proponents of regulating TPLF overstate its risks. Section III situates these concerns within the existing EU law framework, demonstrating that many of them are already mitigated by existing legislation. We therefore challenge the premise that restricting litigation funding advances customer protection and advocate for a carefully calibrated approach that preserves the functions of TPLF, intervening only when concrete and demonstrable risks can be observed.

Suggested Citation

  • Morell, Alexander & Schellenberg, Daniel, 2026. "Regulating third-party litigation funding? Weighing the arguments in the light of extant EU consumer protection safeguards," SAFE Working Paper Series 482, Leibniz Institute for Financial Research SAFE.
    • Handle: RePEc:zbw:safewp:341093
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/341093/1/1970762241.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Grossman, Sanford J, 1981. "The Informational Role of Warranties and Private Disclosure about Product Quality," Journal of Law and Economics, University of Chicago Press, vol. 24(3), pages 461-483, December.
    2. Dominique Demougin & Felix Maultzsch, 2014. "Third-Party Financing of Litigation: Legal Approaches and a Formal Model," CESifo Economic Studies, CESifo Group, vol. 60(3), pages 525-553.
    3. Morell, Alexander & Schellenberg, Daniel, 2026. "The incentive structure of litigation finance: How free coordination turns financed collective redress into an indispensable internalization tool," SAFE Working Paper Series 481, Leibniz Institute for Financial Research SAFE.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ginger Zhe Jin & Andrew Kato & John A. List, 2010. "That’S News To Me! Information Revelation In Professional Certification Markets," Economic Inquiry, Western Economic Association International, vol. 48(1), pages 104-122, January.
    2. Persson, Petra, 2018. "Attention manipulation and information overload," Behavioural Public Policy, Cambridge University Press, vol. 2(1), pages 78-106, May.
    3. Villas-Boas, Sofia B, 2020. "Reduced Form Evidence on Belief Updating Under Asymmetric Information," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt08c456vk, Department of Agricultural & Resource Economics, UC Berkeley.
    4. Wouter Dessein & Alex Frankel & Navin Kartik, 2025. "Test-Optional Admissions," American Economic Review, American Economic Association, vol. 115(9), pages 3130-3170, September.
    5. He Huang & Yufeng Yang & Hongyan Xu, 2025. "Larger number of reviews or higher rating? The firm’s pricing and quality disclosure strategies on the online platform," Information Technology and Management, Springer, vol. 26(1), pages 39-56, March.
    6. Waters, James, 2015. "Optimal design and consequences of financial disclosure regulation: a real options approach," MPRA Paper 63369, University Library of Munich, Germany.
    7. Simeon Schudy & Verena Utikal, 2015. "Does imperfect data privacy stop people from collecting personal health data?," TWI Research Paper Series 98, Thurgauer Wirtschaftsinstitut, Universität Konstanz.
    8. Ribstein Larry E., 2005. "Cross-Listing and Regulatory Competition," Review of Law & Economics, De Gruyter, vol. 1(1), pages 97-148, April.
    9. Roger Bate & Ginger Zhe Jin & Aparna Mathur, 2012. "In Whom We Trust: The Role of Certification Agencies in Online Drug Markets," NBER Working Papers 17955, National Bureau of Economic Research, Inc.
    10. Eduardo Perez & Delphine Prady, 2012. "Complicating to Persuade?," Working Papers hal-03583827, HAL.
    11. Shuo Liu & Dimitri Migrow, 2019. "Designing organizations in volatile markets," ECON - Working Papers 319, Department of Economics - University of Zurich.
    12. repec:hum:wpaper:sfb649dp2014-041 is not listed on IDEAS
    13. Matthew Plosser & João A. C. Santos, 2014. "Banks' incentives and the quality of internal risk models," Staff Reports 704, Federal Reserve Bank of New York.
    14. Xiao-Jun Zhang, 2012. "Information relevance, reliability and disclosure," Review of Accounting Studies, Springer, vol. 17(1), pages 189-226, March.
    15. Alexander E. Saak, 2017. "The Value of Delegated Quality Control," Journal of Industrial Economics, Wiley Blackwell, vol. 65(2), pages 309-335, June.
    16. Xu Jiang & Ying Xue, 2023. "Morale, performance and disclosure," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 56(1), pages 5-23, February.
    17. Gabriele Gratton & Richard Holden & Anton Kolotilin, 2015. "Timing Information Flows," Discussion Papers 2015-16, School of Economics, The University of New South Wales.
    18. Jeffrey J. Burks & Christine Cuny & Joseph Gerakos & João Granja, 2018. "Competition and voluntary disclosure: evidence from deregulation in the banking industry," Review of Accounting Studies, Springer, vol. 23(4), pages 1471-1511, December.
    19. Ivan Balbuzanov, 2019. "Lies and consequences," International Journal of Game Theory, Springer;Game Theory Society, vol. 48(4), pages 1203-1240, December.
    20. Celik, Levent, 2016. "Competitive provision of tune-ins under common private information," International Journal of Industrial Organization, Elsevier, vol. 44(C), pages 113-122.
    21. Ximin (Natalie) Huang & Atalay Atasu & Necati Tereyağoğlu & L. Beril Toktay, 2023. "Lemons, Trade-Ins, and Certified Pre-Owned Programs," Manufacturing & Service Operations Management, INFORMS, vol. 25(2), pages 737-755, March.

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:safewp:341093. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: https://edirc.repec.org/data/csafede.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.