Third party litigation funding is a concept that is gaining popularity in the United Kingdom, Australia, United States and continental Europe.
In general, third party litigation funding means a situation when the funders agree to fund legal and other costs of a party to a dispute in return for a percentage of the damages and/or a multiple of the funding. Third party litigation funding is something different than a transfer of claims. It offers more and more complex financial instruments (regarding financing a dispute and risk sharing) and is more of litigation finance nowadays. However, the funds that are specialised in litigation finance only have started to look for promising projects in Poland. Therefore, Poland can be classified as an emerging market for third party litigation funding.
As in many other European jurisdictions, in Poland, third party litigation funding is not regulated. Therefore, as long as third party litigation funding does not breach e.g. bar rules or statutory regulations regarding conflict of interest, client-attorney privilege or independence of the attorney handling the case, it can be described as an unnamed contractual relationship that is permissible in accordance with Article 353 of the Polish Civil Code.
In jurisdictions where the litigation finance sector is developed, class action cases are often financed by funds. However, in Poland, class actions are not as popular as in other countries. The reason for this is the large number of formal requirements that claimants have to meet in accordance with the Act On Pursuing Claims in Group Proceedings. As a result, according to official data published by the Polish Ministry of Justice, there were only 32 new class action cases in 2015. Nevertheless, in construction disputes in Poland, claimants (buyers of apartments) tend not to use the class action procedure, but to transfer their claims onto housing associations. This allows them to bypass the requirements of the class action procedure. This can be a good opportunity for litigation funding. Firstly, the value of construction claims is substantial. Secondly, the flow of new cases (new disputes) in the foreseeable future will be stable. Thirdly, a transfer of claims onto housing associations facilitates communication of the apartment owners with attorneys and the funders due to the fact that housing associations have an established structure and management board. Finally, the disputes tend to last long and generate significant costs. Therefore, third party litigation funding may be an interesting alternative in construction disputes in Poland as it may allow housing communities to avoid or minimise costs and risk connected with lengthy construction disputes with real estate companies.