In Sweden, there are no legal prohibitions against third party funding of litigation. A third party is always allowed to pay another party's litigation costs provided that the litigating party and the third party have agreed on this.

However, there are certain limitations placed on a lawyer engaged in matters involving third party funding. If there would be a significant risk of a conflict of interest arising between the litigating party and the third party, the ethical rules in the Swedish Bar Association's Code of Conduct may in some cases prevent the lawyer from acting. Furthermore, the Code of Conduct also prohibits a member of the Bar Association from being financially involved in its client's affairs. For example, the member may not as a general rule make loans to and/or request or accept commission from a client. As a consequence, a lawyer in Sweden may not generally act as the third party which funds the client's litigation.

Historically, the main third party funder in Sweden has been the Government. In some situations, the Swedish general welfare system permits the grant of financial legal aid to individuals who are unable to pay for a legal representative themselves. However, this type of funding has become more restricted over the last few decades and today the main third party funders are insurance companies. It is now very common - both for private individuals and other legal entities in Sweden - to have insurance polices which, to a limited extent, entitle parties to litigation to be reimbursed for costs incurred.

Whilst class action legislation was enacted in 2002, there have been relatively few class action claims to date. As a consequence, third party funding has not yet expanded to fund the opportunities provided by the new legislation.