Collective Redress Regime and its Impact on Litigation Funding

The German legislature is in the midst of groundbreaking decisions surrounding legal tech. They recently validated the business model of LexFox, a legal tech company. By ruling that LexFox did not violate the German Legal Services Act, the court validated similar companies like myRight and Flightright.

JD Supra explains that in the coming year, traditional law firms and more modernized legal tech companies will find themselves at odds. The shakeup caused by the growing acceptance of litigation funding and contingency fees is somewhat calmed by the revised Legal Services Act. The new revisions are expected to add clarity and guidance to the practice of legal funding.

Meanwhile, the final months of 2020 brought about new directives on collective redress. The new rules, which expand collective actions, won’t go into effect until 2023. This new directive is expected to strike a balance between giving citizens a process to ensure consumer access to justice and preventing an influx of frivolous or abusive litigation.

Of note, the new directives do not contain specifics regarding international litigation. This could lead to increased forum shopping—the practice of finding a friendly jurisdiction for one’s case. Directives also maintain that litigation funding can be used—but that there cannot be a conflict of interest. This is, of course, in keeping with Litigation Finance best practices all over the world. It’s expected that the availability of legal funding will impact where and how cases are managed.

The German Bar is vocally against many of these changes, and strong public debate is expected. Ultimately though, wronged consumers should expect more opportunities to see their day in court.