U.S. Chamber Institute for Legal Reform group urges EU-wide rules on third-party litigation funding

The U.S. Chamber Institute for Legal Reform has called for the inclusion of balanced, EU-wide rules for third-party litigation funding in the European Commission's "Justice for Growth" initiative. This recommendation was made in a recent press release aimed at enhancing transparency and competitiveness within the European Union.

According to the European Commission, the "Justice for Growth" initiative, led by Justice Commissioner Michael McGrath, seeks to modernize EU civil and corporate law while strengthening justice systems to improve competitiveness. The initiative is part of a broader mandate to reduce barriers for businesses and simplify legal processes across the single market. High-level forums have been organized to gather stakeholders and policymakers to determine policy priorities, including addressing the regulation of third-party litigation funding.

The Institute for Legal Reform’s report, "Tort Costs in America," indicates that total costs and compensation in the U.S. tort system amounted to $529 billion in 2022, or 2.1% of GDP. The study highlights that this equates to roughly $4,207 per household, underscoring the widespread economic impact of excessive litigation. The report also found that tort costs have grown faster than inflation in recent years, rising by an average of 7.1% annually between 2016 and 2022.

CLM Magazine summarized ILR’s data by emphasizing that commercial liability costs are increasing faster than overall liability. Commercial liability (excluding medical liability) is growing at 8.8% annually, while commercial auto liability is increasing at 10.1% annually. Analysts note these trends particularly affect small businesses that often lack capital reserves to manage financial risks associated with litigation. Rising liability costs not only strain small enterprises but also create ripple effects throughout the economy, reducing competitiveness and discouraging investment.

The U.S. Chamber Institute for Legal Reform (ILR), an affiliate of the U.S. Chamber of Commerce, serves as its legal reform advocacy arm. According to its official website, ILR conducts research, publishes reports, and builds coalitions to support reforms aimed at enhancing transparency, reducing lawsuit abuse, and strengthening legal systems globally. Its mission is to promote a fair, balanced, and efficient legal environment that fosters innovation, investment, and economic growth.