This article was originally published on Dirittoegiustizia.it, a highly regarded Italian legal news outlet, widely followed by lawyers, judges, and scholars. It is published by Giuffrè Francis Lefebvre, a leading publishing house in the legal and tax sectors.
In recent years, Italy has witnessed a significant increase in ordinary litigation. According to the Annual Report of the Ministry of Justice, civil lawsuits filed in 2024 rose by 6.5% compared to the previous year.
Litigation has thus become one of the most relevant areas for law firms in Italy, representing a key pillar of their operations. However, the growing complexity of disputes and new client expectations demand innovative solutions. In response, lawyers are exploring advanced tools and strategies to provide increasingly personalized and effective services, tailored to clients involved in complex, costly, and often international disputes. Among these tools is litigation funding, which is emerging as a strategic resource alongside lawyers and their clients in managing demanding cases.
Litigation funding is a form of investment in which a specialized fund covers the legal costs of a party in a lawsuit until its conclusion. If the outcome is favorable for the funded party, the fund receives a portion of the recovered sums. If the outcome is negative, the fund loses its entire investment, with no cost to the funded party. By its nature, litigation funding facilitates access to justice and enables the externalization of the financial risk associated with litigation.
Advantages of Litigation Funding for Lawyers
Litigation funding allows lawyers to offer their clients the opportunity to externalize litigation-related costs. In a typical structure, the legal expenses—including attorneys' fees—are fully covered by the funder, who is only compensated in the event of a successful outcome and recovery.
In Italy, litigation funding is particularly relevant due to the ban on contingency fees (“patto quota lite”), which prohibits lawyers from receiving, in whole or in part, a share of the claim or disputed amount as compensation. Nonetheless, companies increasingly refuse to bear litigation costs, especially considering the delays of the Italian justice system. In this scenario, litigation funding offers a viable and potentially more attractive alternative for lawyers, as it allows their clients to proceed without advance payment—without transferring the economic risk to the lawyers themselves.
Types of Clients That Benefit Most from This Solution
Litigation funding is an essential solution for companies or individuals with limited financial resources. However, it is also increasingly appreciated and utilized by large corporations, multinationals, institutional investors, and pension funds looking to optimize costs. Our experience shows that these groups recognize the strategic value of reducing financial risk while choosing a model that rewards success without requiring upfront investment. Litigation funding thus expands lawyers' options in meeting their clients’ cost-optimization goals and enables legal actions that would otherwise be impossible due to lack of resources.
The Lawyer's Role in Litigation Funding
The lawyer plays a central role in the investment approval process by the funder.
In our case, around 80% of opportunities are introduced by law firms acting on behalf of their clients to find a funder willing to invest. At the outset, the lawyer is responsible for providing all the necessary information for the funder to properly assess the litigation risk.
Following a due diligence phase, if the investment is approved, the parties draft and negotiate a litigation funding agreement, which governs the relationship between funder and client. Once signed, the litigation begins.
Types of Collaboration Between Law Firms and Litigation Funders
There are primarily two modes of collaboration. First, law firms provide legal assistance to the funder’s clients in the relevant disputes.
Second, external lawyers who are not involved in the litigation are engaged to draft legal opinions during the due diligence phase. When legal issues are particularly complex, the funder may consult highly specialized attorneys to assess litigation risks.
The Relationship Between Client, Lawyer, and Funder
The relationship is based on transparent and efficient cooperation. Initially, the client and funder sign an agreement in which the funder commits to covering all litigation costs, including legal fees, expert consultations, and court expenses. In return, the client agrees to pay a percentage of any proceeds in the event of a successful outcome.
Concurrently, the law firm’s fees are determined, with a detailed cost estimate for each phase of the litigation.
Once litigation begins, the funder may take a more or less active role. In a traditional model, the funder remains passive and receives updates without direct involvement. However, clients increasingly prefer funders to take an active role—externalizing not only financial costs but also the time and effort required for litigation. In such cases, the funder directly engages with the lawyers, sharing strategy and offering operational support and experience.
Selection of the Lawyer Handling the Dispute
The client always selects the lawyer for the litigation. However, clients often seek funder recommendations—especially in the case of companies, institutional investors, or foreign individuals unfamiliar with the Italian legal market. Similarly, we assist Italian clients choosing legal counsel for cases in foreign jurisdictions.
Most Effective Collaboration Strategies
Based on our experience with both large firms and boutique practices, the most effective collaborations are built on transparency and shared objectives. A successful strategy requires clear, upfront agreements outlining goals, actions, litigation strategy, and fee structure for each stage. Ongoing communication throughout the case is equally important to address challenges and adapt to new developments.
Examples of How Funders Support Lawyers
Well-established funders provide not only financial resources but also strategic support, particularly in cross-border disputes. Services include asset tracing, which is critical in identifying enforceable assets and preparing for the enforcement phase. This is especially important in international cases where asset discovery can determine the success of recovery.
Funders may also handle document management, especially when large volumes of materials need to be reviewed and filed—freeing lawyers to focus on case strategy rather than time-consuming administrative tasks.
Sectors Offering the Greatest Opportunities
While there are no specific sectors, in Italy litigation funding is most commonly used in private antitrust enforcement, commercial disputes, and international arbitration.
An especially promising area is class actions, which require significant investment in both financial and human resources to inform the class and manage memberships. Here, collaboration with funders allows law firms to externalize costs and focus on legal defense without taking on administrative burdens.
Relevant Regulations and Legal Considerations for Lawyers
Italy, like many other jurisdictions, has no specific legislation on litigation funding. However, certain provisions aim to prevent conflicts of interest.
For instance, under the Consumer Code (Article 140-septies, paragraph 5), claimants in representative actions must disclose any third-party funding. Paragraph 8 declares a claim inadmissible in the event of a conflict of interest—especially if the funder is a competitor or dependent on the defendant.
In arbitration, institutional rules often require disclosure of the funder's identity to identify potential conflicts of interest.
Funders generally welcome these rules, since undisclosed conflicts could jeopardize the outcome.
In some jurisdictions, lawyers are obligated to inform clients about litigation funding options. While Italy has no such requirement, doing so would be beneficial to inform clients of this potentially game-changing solution.
To read the original article (in Italian) on Dirittoegiustizia here.
Written by:
Giacomo Lorenzo
Senior Legal Counsel
