The Crux of the Matter: Funding and Financing Collective Redress Mechanisms

Abstract

Any jurisdiction wanting to introduce a collective redress mechanism will be confronted with the same design options: Will its scope be trans-substantive or restricted? Who will have standing? How will the class be notified? Will it be an opt-in or opt-out regime? And what remedies will be available? However, the question of how the mechanism will be funded and financed transcends all these issues, simply because without appropriate and clear funding rules, they will remain a dead letter. Funding rules are an essential precondition for the proper functioning of any civil justice system. In that sense the funding and financing issue is the crux of the matter, because it goes to the heart of the class action system. This paper maps the various funding options and assess their pros and cons in a collective litigation context. The leitmotif is the recent 2013 EC Recommendation on collective redress mechanisms. Attention is paid to the funding and financing by the class representative, by the class counsel and by a third party (public funding and legal aid, legal expenses Insurance and third-party litigation funding). The paper concludes that there is no clear-cut answer to the question of how collective redress actions should best be financed. The most sustainable solution seems to be a mixture of options.