A Legal, Empirical, and Economic Analysis
New Horizons in Law and Economics series
Edited by Mark Tuil and Louis Visscher
Mark Tuil and Louis Visscher THE PROBLEM OF FINANCING CIVIL LITIGATION Due to several factors not every meritorious claim is brought to justice. One of these factors is the costs that need to be incurred, which might be too high to make the claim feasible in practice. Such barriers to the effectuation of a claim are problematic for the following reasons: firstly, they effectively frustrate access to justice; secondly, civil litigation is the driving force behind private enforcement; and thirdly, the behavioural incentives that actors may derive from the legal rules are reduced by the financing problem. Traditionally this funding problem is overcome in part by government-subsidized legal aid. However, the budget available for legal aid in most European countries and indeed worldwide is limited and is under threat of reduction. Many techniques other than government subsidized legal aid may also overcome the aforementioned problem. Parties can buy legal expense insurance, both ‘before-the-event’ and ‘after-the-event’. Result-based fees for lawyers such as contingency fees and conditional fee arrangements enable plaintiffs to initiate a claim without bearing a financial risk. Collectivization of claims into class actions, collective actions, and/or representative actions might substantially decrease the costs per plaintiff. Cost shifting arrangements exist, such as the English Rule or the inclusion of extra-judicial costs in the determination of damages. Finally, several ‘market solutions’ can be distinguished, such as the Cartel Damage Claims (CDC) whereby victims of antitrust law infringements can sell their claim to CDC for a fixed price plus an additional percentage...