Facts
The Cantonal Council of the Canton of Zurich enacted a new Lawyers Act (AnwG/ZH) on 17 November 2003, which includes a prohibition on litigation funding. L. GmbH and M. filed a constitutional complaint against this provision and alleged a violation of freedom of economy and freedom of contract. The complainants argued that the prohibition on litigation funding was not justified by a public interest and was disproportionate.
Complainant 1, a foreign legal entity, can invoke freedom of economy under Art. 27 Cst., as it has the right to provide services in Switzerland under the Free Movement of Persons Agreement (AFMP). Litigation funding is to be considered a service within the meaning of Art. 5 AFMP.
The contested provision regulates the exercise of a private economic activity and affects not only lawyers but also other persons who broker litigation funding. The addressees of the provision are not only lawyers but also other persons who wish to offer or broker litigation funding.
Considerations
The Federal Court examined whether the prohibition on litigation funding was justified by a public interest and whether it was proportionate. The Court concluded that the prohibition on litigation funding was not justified by a public interest, as the reasons cited by the Cantonal Council, such as ensuring the independence of lawyers and avoiding conflicts of interest, were not sufficient to justify a general prohibition on litigation funding.
The Court stated that litigation funding is generally permissible and that it cannot be ruled out that certain litigation funding systems may affect or endanger the independence of lawyers or other legal interests. However, federal law, such as the Lawyers Act (FMLA)…