France
French legal landscape has recently been deeply influenced by major world events. The ongoing conflict involving Russia and Ukraine, for example, or Red Sea attacks, are impacting the legal world by affecting delivery times and the ability of companies to guarantee imports and exports.
Within the French jurisdiction, the growing interest in environmental, social and governance (ESG) matters has also significantly impacted the litigation market, as the number of cases related to ESG concerns are constantly increasing. We are also seeing a trend in litigation related to banking fraud and enforcement.
Class actions may also rise, as a new reform is currently being discussed to create a common procedural framework for class actions.
1. Is third party funding permissible for disputes?
Yes, third-party funding is permissible for disputes in France.
While French law does not specifically regulate third-party funding, the Paris Bar Council has adopted a resolution in 2017 stating that the practice of third-party funding is favourable to the interests of parties and that there is no provision under French law prohibiting a party from using the services of a third party funder to finance an international arbitration proceedings.
This resolution specifies that in order to ensure the development of this practice and to provide a framework for its growth, a lawyer representing a party financed by a third-party funder is required to abide by his or her ethical obligations towards his only client, which is the party being funded.
2. Are lawyers able to work on a contingent basis in the jurisdiction and are there any restrictions?
Under French law, a fee agreement between a party and its lawyer providing for the payment fees which are solely based on the legal outcome of a proceedings is unlawful.
It is, however, possible for parties and their lawyer to agree that, in addition to a remuneration for services rendered, an additional contingency fee will be paid to the lawyer depending on the result obtained or the service rendered.
In practice, this means that a portion of the legal fees must be paid regardless of the outcome of the case. The exact percentage can vary and is typically agreed upon in writing between the lawyers and their client.
The lawyer and the client must sign a fee agreement providing for a service fee and a contingency fee, and specifying in details the conditions under which the contingency fee will be payable. The terms of the fee agreement must be clear and precise.
3. Can the court or tribunal order one party to pay the other’s legal costs?
Yes, pursuant to French rules of civil procedure, a court can order the losing party to pay all or part of the other party’s legal costs.
French courts enjoy a broad discretion in this respect and must, in any event, take into account equitable considerations and the economic situation of the losing party.
Adverse cost awards issued by French courts are generally lower that the ones ordered in common law jurisdictions.
4. Is insurance available to protect against adverse outcomes for funded litigation?
Yes, it is theoretically possible under French law to subscribe insurance policies protecting against adverse outcomes for a litigation (called After The Event insurance or ATE insurance).
However, it is rarely used in practice because the costs of litigation proceedings before the French Courts and adverse cost awards are much lower than in common law jurisdictions, and therefore not high enough to make it worth having recourse to an ATE insurance.
Contact
Sarah Monnerville Smith Partner
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