Litigation Funding 2024
Italy
Authors
Delex is the first Italian law firm specialised in collective litigation. It focuses on private enforcement of competition law, securities litigation, environmental liability, personal injuries and product liability. The firm is based in Milan and Brescia and consists of a team of eight lawyers, assisted by several trainee lawyers, paralegals, and administrative staff. Delex has unique experience in litigating complex cases, having assisted some of the most important Italian consumer associations in several inhibitory and compensatory representative actions and one of the most important book-building company in litigating group cases on behalf of hundreds of firms. In litigating these cases, Delex has also developed significant experience, unique in the Italian market, in the digitalisation, verification, organisation and presentation in court of large quantities of documents. Many of the collective cases litigated by Delex are funded by national or international litigation funders. In this respect, Delex advises litigation funders on how to structure an LFA that is enforceable in Italy or a purchase of claims, in addition to providing litigation funders with second opinions on collective or individual cases litigated by other law firms.
1. Legal and Regulatory Framework for Litigation Funding
1.1 Legality of Litigation Funding
General Permissibility of TPLF
In Italy there are no legal provisions against third-party litigation funding (TPLF). Therefore, it is commonly held that litigation funding is generally permissible. The general permissibility of litigation funding under Italian law has been implicitly confirmed by the Italian legislature in implementing Directive 2020/1828/EU on representative actions for the protection of the collective interests of the consumer. This Directive requires member states to introduce certain rules on litigation funding only to the extent that TPLF is allowed by national law. By introducing these TPLF rules in Law No 28 of 10 March 2023, which implements the Directive, the Italian legislature implicitly acknowledged that TPLF is generally admissible under Italian law.
General Permissibility of the Assignment/Purchase of Claims Model
Under Italian law, the litigation funder may also elect to perform its activity through the assignment of claims model – ie, by purchasing the claim (so-called res litigiosa). Indeed, according to settled case law of the Italian Supreme Court (among the many see Cass., 10 January 2012, n. 52; Cass., 13 May 2009, n. 11095; Cass., 5 November 2004, n. 21192; Cass., 21 April 1986, n. 2812), the purchase of a claim for compensation of damages is a perfectly valid and enforceable contract, both for pecuniary and non-pecuniary damages.
Enforceability of the Purchase of Claim Against the Defendant and Other Third Parties
In order to make the purchase of claim effective and enforceable against the defendant, it is sufficient to inform him/her by any means (eg, by registered mail or email) of the purchase. On the other hand, in order to make the purchase effective against other third parties (eg, other purchasers of the same claim, or creditors of the seller of the claim), it is necessary to serve the purchase to the defendant, either by introducing the proceedings (so-called litis contestatio) or by extrajudicial means through a bailiff. If claims are purchased by a securitisation company “in block” (eg, the claims of a certain number of victims of a cartel), it is sufficient to publish a notice of the purchase on the Italian Official Journal (IOJ) to make the purchase effective against the defendant and any other third party. Publication of the notice of purchase on the IOJ produces its effects only within the Italian territory. Therefore, if the claim purchased in Italy will be enforced in another jurisdiction (eg, Germany), it may be necessary to notify the defendant of the purchase by other means that produce the same effects under the relevant national law.
1.2 Rules and Regulations on Litigation Funding
Purchase of Claims on a Recurring Basis
According to Italian law, the purchase of claims on a professional (ie, recurring) basis is an activity reserved for banks or other financial intermediaries duly registered and supervised by the Bank of Italy (Article 106 of the Italian Banking Act). This activity may also be performed by alternative investment funds, directly or indirectly supervised by the Bank of Italy or another EU supervisory authority (Article 1, lett. k, of the Italian Financial Act and of Article 4, lett. e, of the Decree of the Ministry of the Economy and Finance No 30 of 5 March 2015) or by securitisation companies (Law No 130 of 30 April 1999).
Any purchase of claims contract concluded by a subject not duly authorised, which performs its activity on a professional basis, is null and void. As a consequence thereof, the defendant may successfully challenge the legitimacy of the assignee on the grounds that it did not validly acquire the property of the claim. In addition, purchasing claims on a professional basis without being duly authorised represents an illegal activity that exposes the assignee to administrative and criminal sanctions.
Is TPFL on a Professional Basis a Reserved Activity?
Some argue that engaging in litigation funding on a professional (ie, recurring) basis may be an activity exclusively reserved for financial intermediaries, alternative investment funds (AIFs) or securitisation companies. This view is based on the argument that, when the consideration of the litigation funder is a share of the judicial award (eg, 30% of the award), the litigation funding is equivalent to the purchase of a share of the claim, under the condition that the case is successful. Therefore, if performed on a recurring basis, it falls under the activities reserved for these entities (financial intermediaries, AIFs or securitisation companies).
The Bank of Italy has not yet taken an official position on this issue. However, it may be advisable that any future litigation funding agreements (LFAs), especially where the funder is remunerated through a share of the judicial award, are entered into by entities, whether financial intermediaries, AIFs or securitisation companies, which are directly or indirectly supervised by the Bank of Italy or other EU supervisory authorities.
TPLF of Representative Actions
In Italy, as in all other EU member states, special provisions apply to funding of representative actions brought by qualified entities (eg, consumer associations) on behalf of consumers. In particular:
- The qualified entity that brings the action is obliged to disclose to the Tribunal the fact that the action is financed by a third-party funder and its identity.
- Before admitting the action, the Tribunal must verify, also by its own motion, that there is no conflict of interest between the third-party funder and the interests of the consumers represented in the action, and in particular that the funder is not a competitor of the defendant or does not depend on him/her (Article 140-septies, par. 8, lett. e, of the Italian Consumer Code, implementing Article 10 of Directive 2020/1828/EU).
- Any settlement between the qualified entity and the defendant must be approved by the Tribunal, which will also verify that the funder did not unduly influence the terms of the settlement in a manner that would be detrimental to the collective interests of the consumers concerned (recital 52 of Directive 2020/1828/EU).
However, it should be noted that, at least for the time being, representative actions are not attractive for funders. This is due to the fact that Italian law foresees that only the lawyer of the qualified entity and the so-called “representative of the class” are remunerated through a share of the award in case of success. While the funder may not share in the share of the award of the “representative of the class”, which is appointed by the tribunal and has the role of verifying the claims and documentation of the consumers that opted in, there are no obstacles for the funder to share in the share of the award of the lawyer. However, the share of the lawyer is too little, because it ranges from 0.5% to 9% of the total award, depending on the number of consumers opting in. Therefore, it seems that, at least until the Italian representative action regime is made more effective, the assignment of claims model is more attractive to funders in consumer cases too.
1.3 Non-legal Rules
Code of Conducts by Industry Associations
In Italy, TPLF is generally unregulated also as far as non-legal rules are concerned. This is probably due to the fact that the Italian industry of litigation funding is still relatively underdeveloped and, in particular, a national association of litigation funders has not yet been established. Therefore, there is still no Italian code of conduct that is applicable to the industry. Of course, Italian litigation funders or international funders providing their services in Italy are free to align their activities with an international code of conduct, such as the Code of Conduct of the European Litigation Funder Association, provided that such codes are not in contradiction with Italian mandatory rules.
Rules by Arbitral Institutions
Like other European arbitral institutions, the most important Italian arbitral institutions have recognised the relevance of TPLF in arbitration and have recently introduced some provisions that are binding for arbitral proceedings administrated under their rules. For example, the Arbitration Rules of the Milan Chamber of Arbitration, by far the most important Italian Arbitral Institution, foresee that the party that is funded by a third party in relation to the proceedings and its outcome shall disclose the existence of the funding and the identity of the funder (Article 43 of the Rules).
1.4 Consumer Protection, etc
Consumer Protection
If the litigation funding is provided directly to consumers, the general rules on consumer protection apply. In particular, the rules against unfair terms in consumer contracts introduced by Directive 93/13/EEC must be considered. In this respect, the LFA may not include any contractual term that, contrary to the requirement of good faith, determines an excessive imbalance between the rights and obligations of the parties to the detriment of the consumer. For example, a contractual term that reserves to the funder the exclusive right to decide if and on which terms to settle the case may be considered unfair and contrary to the requirement of good faith.
No Fairness Test of the Economic Terms of the LFA With Consumers
Italian courts are not allowed to question the fairness of the economic terms (eg, the price) of any contract concluded between professionals and consumers, provided that such economic terms have been determined in a clear and transparent manner. Therefore, Italian courts may not question the fairness of the remuneration of the litigation funder, if it has been clearly agreed with the consumer.
No Fairness Test of the Economic Terms of the LFA in Representative Actions
The EU Directive on Representative Actions left it open to member states to allow their national courts to refuse to approve a settlement on the grounds that the settlement is unfair. When the representative action is financed by a third party, this verification of the fairness of the settlement may extend also to the remuneration of the funders, and in particular to their share of the award. In implementing the Directive on Representative Actions, the Italian legislature excluded the possibility of national courts also verifying the fairness of the settlement and limited the verification to the conformity of the settlement to mandatory rules and to its enforceability according to Italian law. Therefore, Italian courts, in approving any settlement agreed by a qualified entity and a defendant, if the representative action has been funded by a third party, may not question the fairness of the remuneration of the litigation funder and in particular of its share of the award.
No Fairness Test of the Price Paid in the Assignment of Claim Model
For the same reason, when the litigation funder has used the assignment of claims model, by purchasing the claim, Italian courts are not allowed to question the fairness of the agreement reached by the parties to the assignment. The principle of freedom of contract applies. For example, when the parties have agreed that the assignor receives a contingent payment (ie, “if and when” the claim is successfully enforced), courts may not question the validity of the assignment by arguing that the percentage held by the assignee (eg, 30%) is too high. For the same reason, when the parties have agreed that the assignor receives an upfront payment (ie, at the time of the assignment and independently of the outcome of the enforcement proceeding), courts may not question the validity of the assignment by arguing that the assignor has been paid too little (eg, 10% of the estimated value of the claim).
Rules Against Usury Do Not Apply
Even though this issue has never been addressed by Italian courts, it should be excluded that the rules against usury apply to litigation funding. Indeed, under Italian Law, lenders and borrowers are not free to agree on the highest rate of interest that the borrower is willing to pay, but must agree on a rate of interest that is lower than a threshold calculated by the Bank of Italy every three months on the basis of the average rates of interest applied by Italian banks to the different kinds of loan (eg, secured, unsecured, revolving, leasing, factoring).
If the parties to a loan agreement of any kind agree to a rate of interest that is higher than the usury threshold, no interests are due and the borrower may claim restitution of all interests paid (Article 1815, par. 2, Italian Civil Code). However, litigation funding is not equivalent to any kind of loan agreement. This is due to the fact that the LFA is an aleatory contract, where the funder does not merely assume the risk of the insolvency of the borrower (as in a traditional loan agreement), or of the insolvency of the debtor that has been assigned to him/her (as in certain factoring agreements), but rather assumes the risk of the non-existence of the claim that has been funded by or assigned to him/her. In other words, even if it may not be disputed that to a certain extent the litigation funder provides finance to the claimant, the credit component of the LFA does not, as such, characterise the agreement.
1.5 Unlawful Terms
Apart from funding contracts with consumers, there are no legal provisions against specific contractual terms in LFAs. In particular, there is no requirement that the funder does not interfere with the most relevant decisions of the case. A “hands-on” or active approach would be consistent with Italian law.
1.6 Disclosure Requirement
There is no general disclosure requirement of TPLF under Italian law. Disclosure of litigation funding is required only for representative actions on behalf of consumers and arbitration proceedings where the applicable arbitration rules so require. For obvious reasons, if the funder uses the assignment of claim model, the Tribunal will be informed of the existence of the funder, because the claim will be enforced in court by the assignee (ie, by the vehicle used by the funder to purchase the claim).
2. Adverse Costs and Insurance
2.1 Adverse Costs
Adverse Costs in Traditional TPLF
Under Italian law, a litigation funder may not be held liable to pay any adverse costs. This follows from the fact that under Italian law only parties to the proceedings may be held liable for adverse costs, and litigation funders are not parties to the proceedings. In general, courts are not even informed of the existence of a third-party litigation funder.
Adverse Costs in the Assignment/Purchase of Claim Model
The scenario is different if the litigation funder purchases the claim to be enforced in court. In this case the litigation funder (or the vehicle used by the funder to purchase the claim) is a party to the proceedings and may therefore be held liable for adverse costs.
How Adverse Costs Are Calculated
In Italy, adverse costs are calculated according to a tariff. This tariff is established by regulation (Decree of the Ministry of Justice No 55/2014), is periodically updated (most recently in 2022), and is mandatory for all Italian courts. Adverse costs liquidated by courts on the basis of the tariff depend on several factors – ie, the kind of proceedings, the value of the claim, the activities actually performed by the lawyers, and the complexity of the case. For example, for an entire first instance individual proceeding, for a case with a value between EUR8 million and EUR16 million, the court may award legal expenses in favour of each defendant ranging from a minimum of EUR41,691 to a maximum of EUR125,071. These values may be further increased or decreased on the base of additional factors.
Costs of Independent Expert Appointed by the Tribunal
In evaluating the costs and risks of litigating in Italy, funders should consider, in addition to the costs of the expert appointed by the party that is funded, also the costs of the independent expert appointed by the Tribunal. Italian courts will typically appoint an independent expert each time they have to take a decision on a technical issue. For example, they will appoint an independent expert to establish the amount of the overcharge caused by a cartel, the effect on stock prices of a fraud, if a certain product is defective, if the defective product has caused the harm for which the claimant seeks compensation, the pecuniary and non-pecuniary damage suffered by the claimant, and so on. The costs of the independent expert must be anticipated by the claimant (or by the other party that has the burden of proving the relevant fact), but are finally borne by the losing party. The costs of the independent expert are calculated by the court on the basis of a tariff and may be doubled in cases of exceptional importance, complexity or difficulty (see Article 49 ff. Presidential Decree 30 May 2002, No 115; and Decree of the Ministry of Justice, 30 May 2002, No 132).
2.2 New Security for Costs
As a general rule, Italian courts may not order security for costs. This is true for all kinds of civil actions: individual, collective or representative.
2.3 Insurance
Until recently, after the event insurance was not widely used in Italy. However, with the development of TPLF, many insurance companies are now demonstrating a willingness to take on the risk of adverse costs.
3. Lawyer Ethics
3.1 Alternative Fee Structures
In Italy, pure contingency fees (“no win, no fee”) are not allowed. Therefore, Italian lawyers are prohibited not only from purchasing the claim (Article 1261 of the Italian Civil Code), but also from financing the claim by accepting to be remunerated for the work performed only if the case turns out to be successful. Typically, for judicial matters, Italian lawyers will not ask for an hourly fee, but rather for a fixed fee for each activity performed, along the lines set out in the judicial tariff. If an Italian lawyer agrees to a fixed fee that is below the minimum level set out in the tariff, this may be considered unethical. In addition to the fixed fee, a “success fee” may be agreed. If an additional success fee is agreed to, the fixed part of the compensation may be below the minimum fee set out in the tariff.
3.2 Fee Sharing
There are no restrictions preventing third-party funders from sharing fees with lawyers.
3.3 Equity Ownership
Equity Ownership, S.T.A.s and the Two-Thirds Rule
Non-lawyers may only own shares in law firms to the extent that the law firm is structured as an S.T.A., which stands for Società Tra Avvocati (ie, company between lawyers).
S.T.A.s are governed by Law No 247 of 31 December 2012, which establishes that lawyers – or lawyers and professionals registered in other registers – must hold at least two-thirds of the share capital and voting rights, and that the governing body must consist only of shareholders and, in its majority, of lawyers (see Cass. United Sections, 19 July 2018, No 19282).
Exceptions to the Two-Thirds Rules
There are some exceptions to the two-thirds rule, in particular:
- regarding the 2/3 vote requirement, deliberative quorums can be strengthened statutorily by providing for unanimous consent, thereby strengthening the position of the non-lawyer minority; and
- regarding the 2/3 capital requirement, the right to profits can be disengaged from the percentage of capital; therefore, for example, the non-lawyer partner, may have a 10% shareholding but an 80% right to profits.
Governance
Despite the exceptions to the two-thirds rule, lawyer partners must outnumber non-professional and professional partners registered in other registers.
This majority presence of lawyers is important in terms of governance and the deliberative quorums required for decision-making in the assembly. The structure of the S.T.A. must fundamentally reflect the consensus of its lawyer members.
Governance is based on the principle that the governing body must be composed of a majority of lawyer members. The equity partner, therefore, can be part of the governing body as long as a position of primacy is maintained in the hands of the lawyer partners.
4. Taxes
4.1 Taxes on Legal Fees
Taxes on Legal Fees
In Italy, taxes, such as VAT (22%) and the National Pension Fund for the Legal Profession (4%) are typically charged on legal fees.
Recoverability of Taxes Paid by the Client
Clients who pay for legal services may be able to reclaim the VAT paid, depending on their nature. In many cases, companies and professionals can treat the VAT they incur on expenses, including legal fees, as input tax and offset it against the VAT they collect on their sales. Consumers, instead, are typically not able to reclaim the VAT paid.
4.2 Withholding on Payments to Offshore Jurisdictions
There is no applicable information in this jurisdiction.
Trends and Developments
Author
Libra Claims stands as the premier Italian aggregator, specialising in collective and mass tort book building, and holds a market leadership position in private antitrust enforcement cases. Based in Milan and Brescia, the organisational framework comprises a back office unit overseeing document verification, archiving, and the preparation of litigation evidence through AI-driven automated control systems. The commercial network is geographically and industrially segmented, overseen by a sales director and managed by area managers. Internal consultants number approximately 100, while external/informant consultants amount to around 250. Complementing this structure is the communication and web marketing office, tasked with designing and orchestrating advertising campaigns to support book-building activities and case development.
The Italian Market
In recent years, the interest in Italy from litigation funders, claimant law firms, and service providers for the management of collective claims and mass torts claims has steadily increased. Currently, the Italian market appears to be one of the most closely monitored, especially in terms of its still untapped potential for litigation finance.
On the other hand, Italy, with a population of 60 million and a complex and structurally renewing economy, stands as the third-largest economy in Europe. Together with France and Germany, it is among the top three European countries in terms of the value of litigation, contributing to a combined GDP of 54% of the European GDP.
Historical barriers to the spread of litigation funding have been progressively eliminated or reduced, and today, Italy has started to attract an ever-growing number of investors and industry operators, joined by local next-generation legal firms and companies.
Contributing to this interesting phase of development are the reforms of civil proceedings, stimulated by the National Recovery and Resilience Plan (il Piano Nazionale di Ripresa e Resilienza, or PNRR), and the increased awareness and understanding of collective damage compensation tools and the investment operations associated with them.
Some fundamental innovations have already been implemented or are in the process of being perfected, such as the introduction of the new accelerated civil procedure, which foresees a 40% reduction in the duration of processes, or the creation of specialised courts and accelerated special procedures for cases of antitrust private enforcement.
On the capital side, there is a growing interest from private and institutional investors and the development of a great sensitivity to the asset class. In the course of 2023, several investment operations have been completed, not only by Anglo-Saxon and Northern European litigation funds but also by Italian club deals and resident speculative funds.
However, the growth space is still enormous. The operations and activities initiated so far cover only a minimal part of the potential of this market, which has all the characteristics to be considered a true “Blue Ocean”.
There is also widespread information asymmetry, determined by the relative novelty of litigation finance activities in Italy and the incomplete knowledge, sometimes even on the part of Italian operators, regarding the novelties and improvements that have occurred in the judicial system.
This situation allows the structuring of operations with extremely appealing returns and much higher than more developed markets such as the US and the UK, also thanks to lower litigation costs.
To summarise the fundamental concepts that best describe the current state of the Italian market for litigation finance, we can undoubtedly note:
- Italy is the third European market in terms of litigation value.
- The spread of litigation finance has begun and is accelerating.
- The development space is enormous.
- The conditions exist to structure operations with high returns on investment.
- Significant structural government reforms have been implemented, including those for the acceleration of the civil process.
- Companies and legal practices specialising in complex/collective litigation and book building have been established and started.
- The number of completed operations is growing, both in quantity and value.
Overview of Key Players
The opportunities within the Italian market have spurred, particularly in the last three years, both the entry or strengthening of operators already active in the sector, notably investment funds, and the emergence and growth of Italian companies born out of increasing interest and awareness in litigation finance.
As of today, it is not possible to precisely estimate the volumes the industry will develop in the coming years, but it is evident that the market is decidedly underserved, and the entry and activity spaces are vast and highly appealing.
From the perspective of law firms, it must be highlighted, historically, that the Italian legal market has been characterised by two aspects: the trend towards smaller-sized law firms and the absence of specialised firms solely focused on litigation, even less so in collective or mass tort litigation.
The top 50 firms by revenue generated only EUR3.35 billion in 2023, and the rest of the market is still occupied by a large number of small or very small non-specialised firms. Major Italian law firms primarily generate revenue related to M&A, regulation, and financial markets operations, rarely taking on the defence of claimants, and as far as is known, never in relation to collective or mass tort cases.
On the one hand, the process of eliminating smaller firms from the market is already underway and is accelerating. It can be predicted that within ten years from now, there will be a substantial reduction in the overall number of law firms in favour of consolidations and mergers into larger structures more in line with Anglo-Saxon and Northern European standards.
On the other hand, the attractiveness of mass tort cases and, in general, highly complex and high-value collective actions, will stimulate the development of dedicated law firms and the entry of major global law firms specialising in the sector. To some extent, the process has already begun, and some cases, particularly in the field of private antitrust enforcement, have already received significant attention.
It should be added that market development will also lead to the proliferation of companies offering integrated services, particularly functional to mass tort cases, such as aggregators, book builders, economists, service providers, and applications for the massive management of claimants and their data.
Some companies dedicated exclusively to litigation finance or related services have already been established and initiated in Italy. In particular, the formation of the first alternative investment fund dedicated to litigation finance based in Italy, with capital raised from local investors, the launch of the first plaintiff/mass tort law firm, and the introduction of the first structured aggregator that has also participated as a co-investor in some of the developed operations have been noted. Some smaller companies, currently lacking structure, have begun advertising cases and presenting themselves as informants or brokers.
On the other hand, several funds and book builders, particularly from England, America, the Netherlands, and Germany have been active in Italy for some years, and their involvement is continually and progressively intensifying.
A noteworthy peculiarity concerns some specific aspects of the Italian market, particularly regarding book building. Italy is a complex state and culturally rich, with significant social, political, and economic differences among the regions. The experience of the first and currently largest Italian aggregator has shown that it is possible to create books that are large or very large in terms of size and value, confirming strong interest and substantial adherence to developed cases. However, it has been repeatedly confirmed that relying solely on digital communication methods, such as social media channels or webinars, is insufficient for achieving significant volumes in Italy.
The development of truly substantial books necessitates not just effective communication, but also the support of a well-structured and organised physical sales network, capable of cultivating relationships and negotiating participation in collective actions, particularly in the case of corporate claimants. Knowledge of business practices and, in general, Italian culture and business conduct are also indispensable.
It is likely that the specific conditions and circumstances previously mentioned have contributed to the limited success of campaigns launched by foreign entities in Italy. To date, these efforts have not achieved significant results nor have they fully harnessed the potential of Italy’s vast and yet untapped market.
The Proactive Measures of the Italian Antitrust Authority
In terms of proactive measures, the Italian Competition and Market Authority (Autorità Garante della Concorrenza e del Mercato, or AGCM), the Italian Antitrust Authority, has received widespread acclaim at the European level, particularly in recent years. The guardian of fair competition in Italy has distinguished itself through numerous investigative initiatives, robust inquiries, and issued decisions, some of which have anticipated subsequent actions by the European Commission, such as the EUR1.128 billion sanction imposed on Amazon in 2021 for an abuse of dominant position.
Follow-on actions based on decisions binding for civil judges, especially in cases of market distortion causing substantial damages to numerous companies, represent highly attractive scenarios for investors interested in litigation finance.
In Italy, campaigns for book building related to collective claims based on antitrust authority decisions have already been initiated or are in the process of initiation. Notable among these are the cases of cement and corrugated cardboard packaging.
As far as is known, thanks to direct participation in the investigative phase, some significant inquiries by AGCM are already underway or will soon commence. At least three of these, upon conclusively identifying market-distorting conduct, will give rise to enormous follow-on private enforcement cases.
Personal Injuries
The previous section of this in-depth analysis highlighted that Italy, alongside France and Germany, ranks as the third European country in terms of litigation value. This stems from several factors, including the substantial use of private transportation by the Italian population and the prevalence of high-risk activities such as construction and carpentry, often carried out by small or very small-sized enterprises.
Annual statistics from various sources are particularly striking when considered from the standpoint of business opportunities for investors in litigation finance: one million cases of medical malpractice annually; 350,000 annual road accidents with personal injuries to the driver or passengers on board; and 670,000 cases of workplace injuries resulting in personal injuries.
For medical malpractice cases alone, over 300,000 lawsuits are filed each year in Italian courts. If we multiply the total of over two million annual cases by a conservatively estimated average damage value of EUR30,000 per affected party, we can estimate a potential market of at least EUR60 billion annually.
However, this market is currently entirely overlooked from the perspective of litigation finance. With the exception of a singular company set up in 2023 and currently in the launch phase, which, recognising the vast untapped potential, has initiated the offering of cash-out services for this category of claims, no other operator has contemplated integrating litigation finance dynamics into this sector.
It is noteworthy that for at least thirty years, companies and commercial networks in Italy have been offering a full success-fee solution, essentially self-financing and classified as accident agencies. However, the existing services and procedures are markedly different from what a modern litigation finance structure could offer to the market.
Consider, in particular, the acquisition of claims, which is perfectly legal in Italy as long as the acquiring party is regulated by the Bank of Italy or otherwise authorised to operate. In this case, the acquiring entity replaces the original injured party and assumes all the rights, powers, and prerogatives of the original claimant. In this scenario, the monetisation of the claim becomes extraordinarily attractive to the original injured party.
Furthermore, contemplate anticipation services that could be seamlessly combined with claim management, where the claim is not acquired but rather managed on a success fee basis. Additionally, envision a micro or mini-credit service that utilises the compensatory right as collateral, either in full or in part, for the disbursed amount.
In conclusion, the growth potential for this sector is undoubtedly significant, and the interest from potential users is unquestionably high.
An important factor to consider in this context is the duration of compensatory proceedings. Contrary to the general perception regarding the inefficiency of the Italian judicial system, statistics on process duration, published annually and made available by the Ministry of Justice, indicate that average times are entirely in line with European averages. In fact, courts in northern Italy report relatively short case durations.
As noted earlier, this asymmetry concerns not only foreign observers but also many Italians, particularly those with compensatory rights, who often harbor unfounded prejudices regarding the quality of the judicial system, further increasing interest in funding solutions, especially cash-out formulas.
Regarding personal injuries, a statistic based on a relatively significant sample of cases has shown that the average time required to obtain compensation, from the date of the initial request rejected by the insurance company to actual settlement, is quite short, standing at 12.2 months.
Given this context, it is quite reasonable to anticipate substantial growth in this sector, which is likely to attract investors who are interested in the Italian litigation finance market.
Law and Practice
Authors
Delex is the first Italian law firm specialised in collective litigation. It focuses on private enforcement of competition law, securities litigation, environmental liability, personal injuries and product liability. The firm is based in Milan and Brescia and consists of a team of eight lawyers, assisted by several trainee lawyers, paralegals, and administrative staff. Delex has unique experience in litigating complex cases, having assisted some of the most important Italian consumer associations in several inhibitory and compensatory representative actions and one of the most important book-building company in litigating group cases on behalf of hundreds of firms. In litigating these cases, Delex has also developed significant experience, unique in the Italian market, in the digitalisation, verification, organisation and presentation in court of large quantities of documents. Many of the collective cases litigated by Delex are funded by national or international litigation funders. In this respect, Delex advises litigation funders on how to structure an LFA that is enforceable in Italy or a purchase of claims, in addition to providing litigation funders with second opinions on collective or individual cases litigated by other law firms.
Trends and Developments
Author
Libra Claims stands as the premier Italian aggregator, specialising in collective and mass tort book building, and holds a market leadership position in private antitrust enforcement cases. Based in Milan and Brescia, the organisational framework comprises a back office unit overseeing document verification, archiving, and the preparation of litigation evidence through AI-driven automated control systems. The commercial network is geographically and industrially segmented, overseen by a sales director and managed by area managers. Internal consultants number approximately 100, while external/informant consultants amount to around 250. Complementing this structure is the communication and web marketing office, tasked with designing and orchestrating advertising campaigns to support book-building activities and case development.
