Residue Funding:

Re-allocating Excess Funds to Fund New Class Actions

This article introduces and analyses residue funding, a funding method for class actions that allocates the possible residue awarded after winning the case to the original funder. Residue funding can be designed in two different models: an obligatory self-financing system or a return-on-investment system, through different funders. While some negative side effects of the proposed funding method would require additional attention, the smart allocation of excess funds through residue funding and its potential to be combined with other funding methods advocate for a further legal analysis.

1. Problem Statement

1.1. Lack of Funding...

The lack of funding for class actions has been an issue across the EU for a while, and does not seem to have been resolved with the newest Representative Actions Directive (hereinafter: "RAD").2 The RAD exp...

Verder in dit artikel:

Re-allocating Excess Funds to Fund New Class Actions

1. Problem Statement

1.1. Lack of Funding...

1.2. ... and Excess Funds at the End of a Class Action

2. Residue Allocation as a Funding Technique

2.1. Residue Funding in General

2.2. Residue Funding through the Class Representative

2.2.1. Two models

2.2.2. Risks and opportunities

2.3. Residue Funding through a Government Fund

2.3.1. One model

2.3.2. The example of Quebec

2.3.3. Risks and opportunities

2.4. Residue Funding through a Third Party Funder (Third Party Residue Funding)

2.4.1. One model

2.4.2. Risks and opportunities

2.5. Overview

3. Evaluation

3.1. Principal-Agent Problem

3.1.1. Residue funding through the class representative

3.1.2. Residue funding through a government fund

3.1.3. Third party residue funding

3.2. Floods of Litigation

3.3. Adverse Selection Effects

3.4. Incentive to Settle

3.5. Composition of the Class

4. Conclusion