Litigation Insurance as Security: The Syntorr v. Arthrex Turn and What It Means for Funders

In mid-February 2026, the Unified Patent Court's Court of Appeal set aside a €2,000,000 security-for-costs order and, in doing so, handed litigation funders and insurers their clearest signal yet that after-the-event (ATE) insurance is a real UPC tool. The Munich Local Division had told the claimant, Syntorr, to put up €2m by cash deposit or bank guarantee before its infringement case against Arthrex could proceed. The Court of Appeal reversed — not because the sum was wrong, but because the lower court had failed to give proper weight to an ATE litigation-insurance policy the claimant already held. For anyone underwriting UPC security for costs, that is the most important collateral ruling the court has produced.

The decision matters because security for costs is the single largest, earliest cash demand a funded or insured UPC claimant typically faces — and until now the assumption was that it had to be met in hard collateral. Syntorr does not abolish that demand, but it establishes that a well-built insurance policy can make it go away. Below: what the court actually held, the Rule 158 mechanics behind it, and how it reshapes the collateral question against our own security-for-costs dataset.

What the Court of Appeal held in Syntorr v. Arthrex

The facts are a textbook security-for-costs fact pattern. Syntorr, a claimant with limited assets inside the EU, sued the Arthrex group for patent infringement before the Munich Local Division. Arthrex applied under Rule 158 of the Rules of Procedure for security for its costs, and the division ordered Syntorr to post €2m (across two consolidated actions, UPC_CoA_889/2025 and UPC_CoA_890/2025) by cash deposit or bank guarantee — rejecting the claimant's existing litigation-insurance policy as an adequate stand-in.

The Court of Appeal took a different view of how the insurance fit into the analysis, and the distinction is the part underwriters should read carefully. The court did not rule that an insurance policy is, by itself, a new "form of security" under Rule 158 — it expressly left that question open (Bristows; Marks & Clerk). Instead, it held that an ATE policy forms part of the claimant's overall financial position — and that financial position is exactly what the court must assess when deciding whether security is needed at all. Once the policy was properly counted, Syntorr's financial position no longer gave rise to a "legitimate and real concern" that an adverse costs order would be unrecoverable or unduly burdensome to enforce. So no security was necessary.

That is a subtle but consequential route to the same practical result: the order was reversed, the claimant proceeds without posting €2m, and the lever that did the work was an insurance policy (McDermott Will & Schulte).

The Rule 158 mechanism — what "adequate security" means

To see why this is a turn rather than a footnote, recall how the mechanism works. The legal basis is Article 69(4) UPCA, implemented by Rule 158 RoP: on a defendant's request, the court may order the claimant to provide adequate security for the legal costs and other expenses the defendant may later recover. The rule names two classical forms — a deposit of money or a bank guarantee. Both are hard collateral: cash locked in the UPC's deposit account, or a bank's irrevocable undertaking, typically demanded within about a month of the order.

The test is not about the merits. It does not ask who is likely to win on infringement or validity. It asks whether the claimant's financial position creates a legitimate and real concern that a costs order "may not be recoverable and/or … not, or only in an unduly burdensome way, be enforceable." The burden sits on the defendant to substantiate that concern, and the classic trigger is a claimant with no assets inside the EU/EEA — or one domiciled where a UPC cost order is slow or expensive to enforce, such as the US or China.

Syntorr's contribution is to widen what counts on the claimant's side of that assessment. If the claimant's "financial position" includes a robust, directly enforceable insurance policy that the defendant can claim against, the concern that justifies hard collateral may simply fall away. The "adequate security" question is reframed from what form of collateral will you lodge? to does your overall position — insurance included — actually leave the defendant exposed?

The policy terms that did the work

Crucially, the court did not bless ATE insurance in the abstract. It was persuaded by specific, drafted-in features — the real product specification for any insurer wanting to sell this protection into UPC matters. Commentary on the order identifies the elements the court found decisive (Bristows; Forresters):

Read together, these convert a policy from "interesting" into "sufficient." Strip any out — make it voidable, cap it below the recoverable-cost ceiling, route claims only through the claimant, or let it lapse without notice — and the court's logic no longer holds. The lesson is blunt: policy drafting is the whole game. A loose ATE wrapper will not displace a cash demand; a tight one can.

Why funders and insurers should care

For the funding and insurance market, this is a genuine opening. Three points follow directly.

It validates ATE insurance as a UPC litigation instrument. Before Syntorr, an ATE policy was a hedge against the downside — it paid the other side's costs if you lost. After Syntorr, a properly structured policy can also neutralise the upfront security demand, the single biggest cash drag on funding an asset-light claimant. The same instrument now does two jobs.

It reshapes how security exposure is collateralised. A funder no longer has to assume every security order must be met by parking cash or buying a bank guarantee — capital that sits dead for the life of the case. Where an insurer will write the right policy, the collateral can be replaced by a premium, shifting security from a balance-sheet lock-up to an insurable, priced line item.

But the base case still assumes collateral. The court reversed a specific order on specific facts; it did not hold that insurance always defeats security. Plenty of claimants will still be ordered to post cash, and a weak policy changes nothing. Treat Syntorr as expanding the toolkit, not removing the exposure.

That exposure is real and quantifiable. Across the UPC cases our platform has classified, 49 carry a quantified security-for-costs order, running from €10,000 to €3,000,000, with a median of roughly €200,000. Munich's €2m demand in Syntorr sits near the top of that range — the kind of seven-figure order that makes the insurance route worth structuring. And the population most exposed is precisely the one funders and ATE insurers back: where a posting party is identified, claimants are ordered to post security nearly three times as often as respondents (27 versus 10), and those claimants are disproportionately non-practising entities whose only material asset is the patent in suit.

There is also a venue signal Syntorr reinforces. Of the 49 quantified orders, the Court of Appeal accounts for 18 — the single largest share, ahead of Düsseldorf (9), then Hamburg and Munich (4 each) — because security is one of the most heavily appealed questions at the UPC. Syntorr is itself a Court of Appeal order setting aside a first-instance ruling, exactly the pattern our division-level numbers predict. For funders, an adverse security ruling is rarely the end of the matter — and now there is an appellate precedent worth invoking on the way up.

The broader rise of third-party funding and insurance at the UPC

Syntorr does not arrive in a vacuum. The UPC has, from its earliest days, drawn litigation funders and after-the-event insurers for an obvious reason: a single court can deliver a pan-European injunction across 18 contracting states, making the upside of a funded patent claim unusually large. The flip side is unusually large cost exposure, and security for costs is where those two forces collide — which is why the topic has become a funder-and-insurer issue rather than a procedural one.

The market has been moving toward this moment. A wave of NPE and asset-light claimants — the entities most likely to be funded or insured — has driven a steady stream of security applications, and the court has spent 2024–2026 settling the principles: who may apply, where the burden lies, what evidence of foreign-enforcement difficulty a defendant must show, and now what role insurance plays. Each ruling that hardens those principles makes the risk more calculable — and calculable risk is what funders and insurers require before deploying capital. Funders and insurers do not take on incalculable risk, and Syntorr removes one of the larger uncertainties from the equation.

What to watch

• Does the Syntorr standard harden into a checklist? Watch whether first-instance divisions coalesce around a settled list of policy terms — Solvency II insurer, AAE, direct claim, adequate limit, termination moratorium — or keep weighing insurance case by case. A settled list lets insurers standardise a product; fragmentation keeps cash deposits the safe default.
• "Form of security" vs. "financial position." The Court of Appeal left open whether insurance can be ordered as a formal form of security under Rule 158, deciding only that it counts toward the claimant's financial position. How a future panel closes that gap will determine whether insurers are selling a security instrument or merely a balance-sheet input. A parallel early-2026 order (Astellas v. Healios, UPC_CoA_489/2025) treating litigation insurance as a relevant element suggests the theme is broadening across panels.
• Premium pricing meets the median. With the realistic demand centred around €200,000 and ranging to €3m, watch whether ATE pricing for UPC matters beats the cost of locking up collateral. If it does, insurance becomes the default for funded claimants; if premiums run hot, cash keeps winning at the lower end.
• Non-EU enforcement pressure. As long-arm rulings and the post-BSH Hausgeräte expansion pull more US- and China-domiciled claimants into the UPC, expect more security applications premised on enforcement difficulty abroad — and more claimants reaching for an insurance answer.

For funders and insurers, security for costs has gone from an unavoidable cash drag to an increasingly insurable one. Syntorr does not erase the exposure our data fixes — about €200,000 at the median, €10,000 to €3m across the range, with claimants and NPEs squarely in the frame — but it confirms that the right policy can stand between a UPC claimant and a seven-figure collateral demand.

Want the 49 quantified security-for-costs orders behind these figures — by division, amount, and posting party? Explore the platform to see the case-level data.

Related reading

• Security for Costs at the UPC: Who Gets Ordered to Pay, and How Much
• The 20 Most Active Litigants at the UPC
• The UPC at Three Years: Outcome Base Rates Every Litigant Should Know

Sources

• UPClytics.com — internal dataset of classified UPC decisions (snapshot June 2026 build).
• Marks & Clerk — UPC: security for costs not required where claimant is backed by appropriate litigation insurance
• Bristows — UPC Court of Appeal: ATE insurance can eliminate the need for security for costs
• Forresters — Security for costs: UPC Court of Appeal accepts litigation insurance
• McDermott Will & Schulte — McDermott secures landmark UPC win for Syntorr
• Rule 158 RoP — Security for costs of a party (IPPT / IP-PorTal)