{"id":998,"date":"2023-02-15T16:42:50","date_gmt":"2023-02-15T15:42:50","guid":{"rendered":"https:\/\/www.lexcapital.it\/il-litigation-funding-in-rapporto-ad-altri-concetti-giuridiciun-confronto-con-la-sostituzione-processuale-e-la-sostituzione-a-titolo-particolare-in-un-diritto-controverso\/"},"modified":"2026-06-08T17:35:39","modified_gmt":"2026-06-08T15:35:39","slug":"litigation-funding-procedural-substitution-legal-comparison","status":"publish","type":"post","link":"https:\/\/www.lexcapital.it\/en\/litigation-funding-procedural-substitution-legal-comparison\/","title":{"rendered":"LITIGATION FUNDING IN RELATION TO OTHER LEGAL CONCEPTS: A COMPARISON WITH PROCEDURAL SUBSTITUTION AND SUBSTITUTION IN RELATION TO A DISPUTED RIGHT."},"content":{"rendered":"\n
\n\t\t\t\t\"Fondo-per-litigation-funding-980x653.jpg\"\n\t<\/figure>\n\t

A brief introduction to\u00a0Litigation Funding<\/a>\u00a0is undoubtedly necessary.<\/p>\n

TPLF<\/strong>\u00a0– Third Party Litigation Funding is an\u00a0Anglo-Saxon practice\u00a0<\/strong>that aims\u00a0to provide private individuals<\/strong>, companies, public corporations, or local authorities\u00a0with financial support<\/strong>\u00a0(in some circumstances also professional support) to facilitate their\u00a0access to justice<\/strong>.<\/p>\n

This access is facilitated through the provision of\u00a0a fund<\/strong>\u00a0from which the above-mentioned parties can draw so as to\u00a0avoid moving sums from their budgets<\/strong>\u00a0and allow them to\u00a0concentrate on their core business<\/strong>.<\/p>\n

Already\u00a0widely used abroad<\/strong>, it is a highly advantageous practice that is\u00a0rapidly spreading throughout Italy<\/strong>.<\/p>\n

There are\u00a0various forms of TPLF<\/strong>. Currently, the most popular is the\u00a0assignment of the chose in action<\/strong>\u00a0whereby the Fund makes available an agreed sum for the purpose of “financially supporting<\/strong>” the costs of litigation, technical consultancy and any other expenses related to\u00a0managing the litigation<\/strong>.<\/p>\n

These\u00a0sums<\/strong>\u00a0by their nature, both legal and contractual,\u00a0cannot accrue interest in any way<\/strong>, since this would transform the legal concept of the fund into a loan, something that is usually reserved for financial and credit institutions and which is subject to quite different authorisation and regulatory enforcement processes.<\/p>\n

Moreover, in addition to the financial benefit, the\u00a0beneficiary<\/strong>\u00a0of the litigation fund also has the\u00a0advantage of not having to return any sum<\/strong>\u00a0in the event of losing the case, since the agreement assigning the chose in action expressly states that the\u00a0Funder also assumes the risk of losing the case<\/strong>\u00a0– if no further action is to be taken -, also referred to as a “non-recourse<\/strong>” assignment.<\/p>\n

Litigation funding in relation to other judicial concepts: legal standing<\/h2>\n

Having ascertained generally how\u00a0Litigation Funding<\/strong>\u00a0works, we must address the question of how it relates to the Italian legal concepts of\u00a0legal standing<\/strong>,\u00a0procedural substitution<\/strong>\u00a0and\u00a0substitution in relation to a disputed right<\/strong>.<\/p>\n

The legal principle of legal standing –\u00a0legitimatio ad causam<\/a><\/strong>\u00a0– establishes the possibility for a party to\u00a0assert the existence of their own right<\/strong>\u00a0and not the relative\u00a0ownership of said right<\/strong>.<\/p>\n

It will then be for the\u00a0judge<\/strong>\u00a0to\u00a0confirm or refute the existence of such a right on the part of the party with “standing”<\/strong>.<\/p>\n

This follows from the provisions of\u00a0Art. 75<\/a>\u00a0of the\u00a0Italian Code of Civil Procedure<\/strong>, under the heading of\u00a0Legal Capacity<\/em>, which reads as follows:<\/p>\n

“Persons who are able to freely exercise the rights asserted therein are capable of standing in court.” Anyone, therefore, can assert a right in court if they have direct capacity or, in the case of legal persons, through their legal representative and, naturally, by proving the facts in support of said right, pursuant to Art. 2697 of the Italian Civil Code, under the heading “Burden of Proof”.<\/p>\n

Litigation Funding and procedural substitution<\/h3>\n<\/blockquote>\n

Having established the above-mentioned concept, it is worth\u00a0dwelling briefly on another aspect<\/strong>.<\/p>\n

Any parties wishing to\u00a0avail themselves of Litigation Funding<\/strong>\u00a0must deal with the delicate issue of Procedural Substitution, pursuant to\u00a0Art. 81<\/a>\u00a0of the Code of Civil Procedure, which very firmly states that<\/p>\n

Except in cases expressly provided for by law, no one may assert in their own name a right of another person.<\/p><\/blockquote>\n

Procedural substitution represents an exception to this principle<\/strong>\u00a0since it\u00a0dissociates ownership of the action<\/strong>\u00a0(legitimatio ad causam<\/i>) from\u00a0ownership of the substantive situation<\/strong>\u00a0averred in the proceedings, and for this very reason is\u00a0permitted only in specific cases<\/strong>.<\/p>\n

Litigation funding in relation to other judicial concepts: assignment agreement<\/h3>\n

This rightly raises the question of whether the\u00a0Assignment Agreement<\/strong>, through the acquisition of the chose in action by the Litigation Funder, may\u00a0constitute such a case<\/strong>.<\/p>\n

The services provided by the\u00a0Funder<\/strong>, i.e., the entity supporting the person with standing to sue, are\u00a0unrelated to legal assistance<\/strong>\u00a0and do not entail subrogation of the same in asserting their rights. Instead, the Funder\u00a0covers the costs of litigation<\/strong>\u00a0and, to a lesser extent, in the case of\u00a0LexCapital<\/a>, can help procure a lawyer ( a Super Specialist), in the\u00a0capacity of a professional contact<\/strong>\u00a0rather than offering direct assistance.<\/p>\n

It is, conceivably, the\u00a0personification of the fund as a source of aid<\/strong>, which does not replace the party with standing, but rather\u00a0combines a series of activities aimed at guaranteeing easy access to justice<\/strong>, which for many is increasingly difficult and cumbersome.<\/p>\n

However, the term “assignment”of the chose in action brings us back to the\u00a0question of whether a party, when ceding the right to sue<\/strong>\u00a0(legitimatio ad causam<\/i>), in the fullness of their faculties, to another party,\u00a0cedes the right itself to sue<\/strong>, while assuming the financial risk of losing the litigation costs of the party and of the counterparty.<\/p>\n

A persuasive answer to this question is that the\u00a0Funder<\/strong>, through the assignment agreement,\u00a0formally substitutes the party in the legal proceedings but not with regard to ownership of the right claimed<\/strong>\u00a0in the proceedings, the judgment of which, as stated above, has\u00a0legal effect on the substituted party<\/strong>.<\/p>\n

More specifically, the\u00a0law provides that the effects of the judgment shall always apply to the “substituted” party<\/strong>, also incorporating the obligatory joinder of parties (Art. 102<\/strong>\u00a0of the Italian Code of Civil Procedure. “If the judgment must be pronounced with respect to several parties, they must be plaintiffs or defendants in the same proceedings”) in which the effects of the judgment apply to the substituted party, while the financial effects apply to the substitute, owing to the assignment agreement under which the substitute assumes the financial risk of losing the case, with respect to the costs of the proceedings.<\/p>\n

Litigation funding: an important distinction<\/strong><\/h3>\n

This concept should\u00a0not be confused with actions brought under subrogation<\/strong>\u00a0under Art. 2900 of the Civil Code in which a\u00a0creditor may exercise the rights of others to protect its own interest<\/strong>.<\/p>\n

In this case, the\u00a0Funder<\/strong>\u00a0does\u00a0not seek to assert its own interest<\/strong>, which will be limited, in the event of a victory in court or an out-of-court settlement, only to\u00a0the retention of an agreed percentage of the value of the lawsuit<\/strong>\u00a0(or the “petitum”, i.e., the economic value of the Res Litigiosa and, therefore, the amount required as an economic return from the infringement of the right).<\/p>\n

In other circumstances, the\u00a0question arises as to whether the Funder<\/strong>, through the assignment agreement, is\u00a0acting as a substitute under a particular title in a specific claim or legal relationship<\/strong>.<\/p>\n

Art. 111 of the Code of Civil Procedure gives us a first indication:<\/p>\n

If, in the course of the proceedings, the disputed right is transferred by an act between living persons under a particular title, the proceedings shall continue between the original parties”.<\/p><\/blockquote>\n

In the case of succession by particular title, the\u00a0transferor (assignor) brings or defends actions in court<\/strong>\u00a0not as the original party entitled to act but\u00a0as a procedural substitute<\/strong>\u00a0(Art. 81 of the Code of Civil Procedure),\u00a0continuing to be a party to the proceedings for a right they no longer own<\/strong>.<\/p>\n

Also in this case, the\u00a0Fund<\/strong>\u00a0does\u00a0not take over the disputed right<\/strong>, which is the crucial point on which a party asserts their rights or ascertains ownership thereof, but\u00a0takes over in the action to protect or ascertain the disputed right<\/strong>, keeping it in the hands of the assignor.<\/p>\n

Difference between the chose in action and the disputed right<\/h4>\n

Finally, the question arises of whether the chose in action and the disputed right are the same thing.<\/p>\n

The answer is a reassuringly simple: no<\/strong>.<\/p>\n

Chose in Action is the right to take legal action to protect one’s rights<\/strong>\u00a0(a hybrid form of\u00a0legitimatio ad causam<\/i>\u00a0and legal assistance),\u00a0which is assigned in return for financial support<\/strong>\u00a0(for the litigation costs, etc.).<\/p>\n

The Disputed Right is instead the subject matter on which a grievance lies<\/strong>: is a certain property mine or not?\u00a0The Disputed Right concerns understanding the proper ownership of a right<\/strong>\u00a0and, in the present case,\u00a0understanding whether or not a person is actually entitled to compensation<\/strong>\u00a0for damages due to unlawful conduct.<\/p>\n

According to Art. 81 of the Code of Civil Procedure,\u00a0ownership of a right<\/strong>, by virtue of an agreement assigning the Chose in Action,\u00a0cannot<\/strong>\u00a0be acquired in these cases unless ownership of the right itself is transferred, by\u00a0assignment or sale<\/strong>, before or during the proceedings, only in the cases specifically provided for, as mentioned above in Art. 111 of the Code of Civil Procedure.<\/p>\n

Due to the current legislative vacuum,\u00a0agreements concluded with a Litigation Funder<\/strong>\u00a0remain\u00a0atypical contracts<\/strong>\u00a0under Italian law, regarding which the European Parliament expressed its views in its\u00a0Resolution of 13 September 2022<\/a>\u00a0with recommendations to the Commission on Responsible Private Litigation Funding (2020\/2130 (INL)).<\/p>\n

The fund is a key element in the assignment agreement and it is to be\u00a0expected that the Court will intervene by applying the rules of legal standing<\/strong>, transferring this standing to a third party but ensuring the main legal effects of the judgment are applied to the substituted party,\u00a0while the economic effects,<\/strong>\u00a0deriving from the agreement between private parties, are applied to the “substitute”,\u00a0by virtue of the agreement between the parties, pursuant to Article 81 of the Code of Civil Procedure<\/strong>.<\/p>\n

\n

Submit your case<\/h2>\n \n CONTACT US <\/a>\n<\/section>\n\n","protected":false},"excerpt":{"rendered":"

LexCapital \u00e8 presente sulla rivista\u00a0Diritto Bancario\u00a0in un articolo che analizza in maniera dettagliata le caratteristiche del c.d. Third Party Litigation Funding, ovvero il\u00a0finanziamento\u00a0delle\u00a0spese di lite\u00a0da parte di un\u00a0soggetto terzo\u00a0che mira ad ottenere…<\/p>\n","protected":false},"author":4,"featured_media":999,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_genesis_hide_title":false,"_genesis_hide_breadcrumbs":false,"_genesis_hide_singular_image":false,"_genesis_hide_footer_widgets":false,"_genesis_custom_body_class":"","_genesis_custom_post_class":"","_genesis_layout":"","footnotes":""},"categories":[50,51],"tags":[],"class_list":["post-998","post","type-post","status-publish","format-standard","has-post-thumbnail","category-diritto-bancario","category-legal","entry"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.lexcapital.it\/en\/wp-json\/wp\/v2\/posts\/998","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.lexcapital.it\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.lexcapital.it\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.lexcapital.it\/en\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/www.lexcapital.it\/en\/wp-json\/wp\/v2\/comments?post=998"}],"version-history":[{"count":3,"href":"https:\/\/www.lexcapital.it\/en\/wp-json\/wp\/v2\/posts\/998\/revisions"}],"predecessor-version":[{"id":1390,"href":"https:\/\/www.lexcapital.it\/en\/wp-json\/wp\/v2\/posts\/998\/revisions\/1390"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.lexcapital.it\/en\/wp-json\/wp\/v2\/media\/999"}],"wp:attachment":[{"href":"https:\/\/www.lexcapital.it\/en\/wp-json\/wp\/v2\/media?parent=998"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.lexcapital.it\/en\/wp-json\/wp\/v2\/categories?post=998"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.lexcapital.it\/en\/wp-json\/wp\/v2\/tags?post=998"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}