DANIEL SHARMA Germany – The Third Party Litigation Funding Law Review – Edition 1 – The

Law Review

- German Funders TPF in Germany

Since the introduction of the first Third-Party Funders by the end of 1990s Germany has
developed, in terms of Civil Law jurisdictions, the most interesting market in terms of Civil Law
jurisdictions.1

In this jurisdiction Funders target (relative) low-value claims2 that can be easily handled by law
firms with a high degree of specialization in the field of the matter. Although the Funded
Claimant is the formal recipient of the funding (in order to pay lawyer’s fees), for practical
purposes Funder and Funded Claimant have a very limited contact. Usually, German Third-
Party Funders will cover all the cost associated with the reimbursement to the opposing party
in case of not succeeding at the proceedings.3

 Adverse Cost against the claimant

If the claimant comes from a jurisdiction subject to New York Convention, Section 110 No. 2
ZPO (instead of Section 110 No. 1) will be applicable. If after signing the arbitration agreement
a significative evidence that the funded party is not able to reimburse the opposing party
arises, the opposing party may on the basis of Section 20.1 of the Deutsche Institution für
Schiedsgerichtsbarkeit Rules4 (request for an interim relief) request such order for Security for
Adverse costs.

 TPF in Germany

As we said before, most of scholars (particularly Germans) consider Third-Party Funding as a

silent Partnership since RAZONES DE UNA SILENT PARTNERSHIP.

However, attention should be drawn about the fact that this opinion has not been confirmed
by the Bundesgerichtshof.5 Moreover, this perspective has been disputed at lower levels. For
instance, Landgericht Bonn, did not share this conclusion in a 2006 decision, stating that a

1
Frische/Schmidt “Eine neue Form der Verscherung?“ in: Neue Juristische Wochenschrift (NJW) 1999, at
2998.
2
Certain Funders require a minimum of €100,000 Claim Value for the review of potential
funding candidates (SHARMA: Germany – The Third Party Litigation Funding Law Review –
Edition 1 – The Law Review)
3
SHARMA: Germany – The Third Party Litigation Funding Law Review – Edition 1 – The Law Review
4
German Institution of Arbitration
5
La 8
Third-Party Funding arrangement, while it does not fit in an insurance or loan contract
cathegory, is a legal relationship for the exchange of performances where the profit of one
party determines the performance of the other.6 Although Oberlandesgericht Köln praised its
reasoning, neither of them purposed a clear alternative. 7 The same applies for a recent
decision of the Oberlandesgericht Frankfurt.8

On the other hand, our position was partially confirmed by Oberlandesgericht München,
stating that, although Third-Party Funding agreements deserve its own conceptual category, it
seems very similar to the type of partnership we described before.9

--- Enforcement of TPF in Germany

Against (THE OPINION THAT HIGH FEES COULD MEAN UNENFORCEABILITY OF THE AWARD)
Oberlandesgericht München admitted in 2015 a Third-Party Funding Agreement with a success
fee of 50 Percent, attending the special circumstances of the claim10

----- Enforcement of TPF in Germany

decision Oberlandesgericht München 2004 saying that 66 per cent success fees violate public
policy -> nota 18

--- Enforcement of TPF in Germany ESTO NO VA MUCHO DE ENFORCEMENT, ES UN POCO

CHORRA

Certain authors also discussed whether BGB provisions on standard contracts (Section 305 and
ff.) should be applied on standard contracts designed Funders by judicial review. It seems clear
that, if the Bundesgerichtshof supports our view, no judicial review should be applied by
Section 310, Paragraph 4., which includes agreements related to company law should not be
subject to such judicial review.11

 Success fee (contingency fee?)

6
SHARMA: Germany – The Third Party Litigation Funding Law Review – Edition 1 – The Law Review, see
note 10.
7
Nota 11
8
Nota 13
9
Nota 12, and see DONDE PUSIERAS LA SECCIÓN DE SILENT PARTNERSHIP.
10
La 17
11
SHARMA: Germany – The Third Party Litigation Funding Law Review – Edition 1 – The Law Review, see
note 10
Section 4a of the German Law on the Remunaeration of Lawyers (TRADUCIR) does not apply to
funders.12

 Cession / assignment or Selling the Claim (in Germany)

It is worthy of note that it is possible under German Law allows for a cession regardless
whether debtor agrees or not (Section 398 BGB , PONER DE FOOTNOTE) , unless the Entities
agreed otherwise (Section 399).

 TPF in Germany: ANTES QUE NADA: CHAMPERTY AND MAINTENANCE DOCTRINES ARE
ALIENS TO GERMAN LAW

In Germany, disclosure of the fact that Third Party Funder has supported a certain claim is
expresely forbidden in form of a confidentiality clause. Paradoxically, after the legal counsel is
released of its duty of confidentiality by the Funded Party and commits itself to inform the
Funder about any new relevant information, the Funder usually is free to share this
information with other lawyers and experts, whether to review the circumstances of the claim
in the course of the proceedings or even with a view to share risk with a new Third-Party.13

USAR ESTO LUEGO PARA CONTRARRESTAR LA LEGISLACIÓN DE HK Y ¿PROBLEMAS DE

CONFIDENTIALITY-PRIVILEGE AFECTANDO LA ENFORCEABILITY DEL LAUDO?

 Recovery of Costs TPF in Germany

The unsuccessful Party may be requested, in contrast to German Courts criteria, to reimburse
the Funded Party for its costs in relation to the Third-Party Agreement under a German
Arbitration proceeding.

IT IS CONCEIVABLE THAT THE ENFORCING COURT AT HK OR PRC REFUSES TO GRANT THIS

ASPECT OF THE AWARD, GRANTING A PARTIAL ENFORCEMENT.

12
VON SELTMANN, Beck’scher Online-Komentar zum Rechtsanwalts zum
Rechtsanwaltsvergütungsgesetz, Section 4a, Introduction; also Münchner Komentar zur
Zivilprozessordnung, 5th Edition 2016.
13
SHARMA: Germany – The Third Party Litigation Funding Law Review – Edition 1 – The Law Review