Third-Party Funding: A Practical Guide for Finnish Businesses

Third-party funding is a familiar concept in international dispute resolution, but it remains relatively little-known in Finland. Long associated with the Anglo-American legal world, it is now attracting growing interest from businesses and their advisers across the Nordic countries. For Finnish parties having significant but costly claims, understanding how funding works, and when it makes strate-gic sense, is increasingly relevant.

What is third-party funding?

Third-party funding (TPF) is an arrangement in which a specialist funder agrees to cover the legal costs of a claimant in exchange for a share of any recovery obtained through litigation, arbitration, or settlement. The funder also generally covers the costs of the counterparty if the claim is unsuc-cessful and the funded party is ordered to pay the adverse costs. The funder bears the financial risk: if the claim fails, the funder receives no recovery. If it succeeds, the funder typically receives a por-tion of the damages awarded, though some arrangements are structured as a multiple of the capital invested. While this is the most common structure, TPF can also take various other forms depend-ing on the nature of the claim and the parties involved.

Before entering into a funding arrangement, funders conduct rigorous due diligence. Only claims with strong merits and a realistic prospect of recovery will ordinarily attract funding. This gatekeep-ing function has a practical consequence: the involvement of a reputable funder can signal confi-dence in the strength of the claim.

The position under Finnish law

Finnish law does not specifically regulate TPF. There is no statute governing funding arrangements, and no licensing or registration requirement applies to funders operating in Finland. TPF is general-ly permitted.

That said, where the claimant's legal representative is a member of the Finnish Bar Association, any contingency fee arrangement between the lawyer and the client must be in writing and must ade-quately safeguard the client's interests, in accordance with the Bar Association's rules of profession-al conduct. This requirement applies to the lawyer's own fee arrangement and is distinct from the funding agreement between the claimant and the funder, though both may be relevant in a funded matter.

Outside this constraint, TPF is in principle available for both claimants and defendants, though in practice it is overwhelmingly used by claimants, as the economics of funding depend on a share of any recovery. TPF may be sought across disputes of any value and at any stage of the proceedings, however, the amount in dispute must generally be large enough to enable the funder to receive a return on their investment. There is currently no statutory obligation to disclose the existence of a funding arrangement to the opposing party or to the tribunal, although arbitral tribunals may order disclosure of a funding arrangement in the exercise of their procedural powers.

Arbitration and litigation: why the distinction matters

TPF is most commonly encountered in commercial arbitration. Arbitral proceedings, whether con-ducted under the rules of the Finland Arbitration Institute (FAI) or under international rules such as those of the ICC or the SCC, tend to involve larger sums in dispute than in litigation, which makes the economics of funding more viable. Confidentiality matters too: funders typically value the pri-vacy that arbitration provides when managing a portfolio of claims across jurisdictions. The greater predictability of arbitral timelines is a further advantage from a funder's perspective. That said, TPF is also available in court litigation.

In Finnish court proceedings, the Code of Judicial Procedure (oikeudenkäymiskaari 4/1734) applies the general principle that the losing party must reimburse the prevailing party for its reasonable and necessary legal costs. This is also the main rule followed in arbitrations seated in Finland. In the context of litigation in Finnish courts, a question arises as to whether the counterparty of a funded party can be ordered to reimburse the funded party's legal costs, given that it could be argued that the funded party does not itself incur any costs, as the financial risk is borne by the funder. The Finnish Supreme Court has, however, in a recent judgment (KKO 2025:96) – which did not con-cern TPF – held that it is not a prerequisite for a costs award that the party in whose favour the award is made has itself been liable to pay the costs in question. If this principle were applied in the TPF context, it could support the position that a funded party is entitled to recover costs in Finnish litigation. It should be noted, however, that the Supreme Court has not addressed this question in relation to TPF specifically, and some uncertainty therefore remains.

Enforcement is another area where the choice of forum matters. Domestic court judgments are en-forced within Finland under the Enforcement Code (ulosottokaari 705/2007) and in the EU under the Brussels I bis Regulation (Regulation (EU) No 1215/2012). For cross-border disputes, a funded arbitral award benefits from the recognition and enforcement framework of the New York Conven-tion on the Recognition and Enforcement of Foreign Arbitral Awards (1958), to which Finland is a party. This is a significant practical advantage when the respondent's assets are located outside Fin-land or countries where the Brussels I bis Regulation is applicable.

A Nordic and European snapshot

The use of TPF across the Nordic countries varies, though it remains at an early stage in all four jurisdictions discussed here – Sweden, Norway, Denmark, and Finland. Sweden has seen the most activity. Norway and Denmark have experienced more modest uptake, broadly comparable to Fin-land, where TPF remains relatively uncommon but is attracting increasing interest, particularly in higher-value commercial disputes.

At the continental European level, TPF is significantly more established. Germany and the Nether-lands have developed mature funding markets, with a substantial volume of funded claims in com-mercial arbitration, investor-state disputes, and competition law damages actions. The United King-dom, though no longer an EU Member State, remains one of the most developed TPF markets globally and continues to influence European practice.

What does the EU regulatory debate mean for Finland?

In 2025, the European Commission published a comprehensive mapping study examining TPF frameworks across all EU Member States, carried out by an expert consortium led by BIICL. The study identified the absence of harmonised regulation as a significant gap and set out options for future action, including a possible EU directive. The study is a preparatory document and does not represent the Commission's official position, but its findings are expected to shape future legislative work.

Finnish practitioners and businesses should pay close attention to these developments. If the EU introduces requirements on disclosure, conflicts of interest, and conduct standards, those rules will become applicable in Finland.

When does third-party funding make strategic sense?

TPF is well suited to several types of disputes:

• Significant commercial disputes where legal costs are disproportionate to the claimant's re-sources, particularly in international arbitration against a well-funded counterparty, or where a party wishes to limit its financial exposure during the proceedings.
• Insolvency and bankruptcy estate claims, where an insolvency administrator seeks to pursue third-party claims for the benefit of creditors without depleting estate assets.
• Cross-border arbitration, where enforcement under the New York Convention is anticipated and the size of the claim justifies funder investment.

Practical takeaways

Assess funding eligibility early. Funders conduct extensive due diligence, and approaching them before proceedings are commenced provides the best opportunity to frame the claim in a manner that supports a positive funding decision.

Structure the arrangement carefully. The funding agreement should preserve the client's control over settlement decisions and key strategic choices.

Clarify the adverse costs position upfront. Where the "loser pays" principle applies, as it does in Finnish court proceedings and in most arbitral proceedings, the funder's commitment to cover ad-verse costs should be unambiguous and contractually binding.

TPF is no longer a distant or theoretical concept for the Finnish market. For businesses and parties to arbitration or litigation with strong but costly claims, it is a tool worth taking seriously – and, in many cases, worth using.

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