New Trends in Financing Civil Litigation in Europe

New Trends in Financing Civil Litigation in Europe

A Legal, Empirical, and Economic Analysis

New Horizons in Law and Economics series

Edited by Mark Tuil and Louis Visscher

This unique and timely book analyses the problem of financing civil litigation. The expert contributors discuss the legal possibilities and difficulties associated with several instruments – including cost shifting, fee arrangements, legal expense insurance and group litigation.

Chapter 5: Financing Civil Litigation by the European Insurance Industry

Willem H. van Boom

Subjects: economics and finance, law and economics, law - academic, european law, law and economics


Willem H. van Boom 1. INTRODUCTION One of the ways in which legal services are financed, and indeed shaped, is through private insurance arrangement. Two contrasting types of legal expense insurance contracts (LEI) seem to dominate in Europe: beforethe-event (BTE) and after-the-event (ATE) legal expense insurance. Notwithstanding institutional differences between different legal systems, BTE and ATE insurance arrangements may be instrumental if government policy is geared towards strengthening a market-oriented system of financing access to justice for individuals and business. At the same time, emphasizing the role of a private industry as a keeper of the gates to justice raises issues of accountability and transparency, not readily reconcilable with demands of competition. Moreover, multiple actors (clients, lawyers, courts, insurers) are involved, causing behavioural dynamics which are not easily predicted or influenced. Against this background, this chapter looks into BTE and ATE arrangements by analysing the particularities of BTE and ATE arrangements currently available in some European jurisdictions and by painting a picture of their respective markets and legal contexts. This allows for some reflection on the performance of BTE and ATE providers as both financiers and keepers. What emerges from the analysis is that neither BTE nor ATE is perfect; the institutional settings in which they operate seem decisive for their success. There is, however, a specific problematic issue with the long-term sustainability of some ATE products. 2. FINANCING LITIGATION WITH INSURANCE ARRANGEMENTS Fenn et al. (2006, p. 1) rightly note that ‘the ways in which legal services are financed...

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