Reimagining access to justice

The idea behind Third-Party Litigation Funding is to rope investors in that would bankroll such legal battles in exchange for a cut of the winnings. 
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In the heart of India’s legal system, from the Supreme Court in Delhi to modest district courts in rural Bihar, a quiet revolution has been in the making for decades. This revolution is not about abrogating colonial laws, drafting new laws, or ensuring speedier verdicts. Instead, it centres on the question — who foots the bill for justice? In this context, the idea of Third-Party Litigation Funding (TPLF) has quickly emerged as a game-changer, potentially opening courtroom doors for many who felt they had been shut out.

A small shopkeeper from Pune’s markets, waging a lonely battle against a deep-pocketed e-commerce behemoth, or tribal villagers from Odisha challenging a polluting industrial giant — these are not just David and Goliath tales but real-life legal struggles that often end before they begin, not because of weak cases, but empty wallets. The idea behind TPLF is to rope investors in that would bankroll such legal battles in exchange for a cut of the winnings. The need for such an idea in India is painfully clear, given the massive pendency and skyrocketing litigation expenses. Unfortunately, we have reached a stage where justice is increasingly becoming a luxury only a few can afford.

‘Potential equaliser’

The Supreme Court in a landmark judgment Bar Council of India v. A.K. Balaji cautiously gave a green signal to TPLF, viewing it as ‘a potential equaliser in the courtroom’ and categorically holding that TPLF was not off-limits as long as lawyers were not the ones bankrolling such cases. This stance is built on solid historical foundations from the 1876 Privy Council judgment Ram Coomar Coondoo v. Chunder Canto Mookerjee, which held that old English laws on champerty against such funding would not apply to India.

The ripple effects of TPLF could reach every corner of India. In fact, we may witness situations with consumer groups in Mumbai possibly banding together against food adulterators, Bengaluru’s tech startups withstanding pressure against industry giants, tribes supported by NGOs taking on mining mafias without fear of financial ruin, and workers in textile mills facing unfair treatment being able to seek justice. In specialised fields such as medical malpractice or IPR, which heavily depend on expert testimonies, TPLF could honestly turn out to be the difference between a case being heard or silenced. TPLF might breathe new air into Public Interest Litigation, a powerful tool for social change since the 1980s.

Any novel concept cannot evolve without thorough analysis and criticism. Some worry that funders will cherry-pick only the most profitable cases, leaving socially crucial but less lucrative claims in the dust. Further, there is a thorny question of how much say a funder should ordinarily be granted in matters of case strategy. These concerns underscore the need for careful regulation. While States such as Maharashtra, Madhya Pradesh, Orissa, and Gujarat have dipped their toes by amending their civil procedure codes to accord recognition to ‘third-party financier of litigation’, India still lacks a comprehensive national framework for TPLF. Such a regulatory framework is needed to ensure funders are both financially sound and ethically upright, to mandate transparency in funding deals, to protect clients’ decision-making rights, and to cap funders’ profits reasonably.

A more accessible legal system should also bring about stronger consumer safeguards in a country plagued by fake products, better environmental protection in rapidly-industrialising regions, and more accountable institutions across the board. With over ±80,000 cases pending at the top court and ±40 million pending cases across the nation, TPLF does offer more than a ray of hope. In a nation where ‘justice for all’ has long been a constitutional dream, TPLF might help turn it into reality — one funded lawsuit at a time.

As we turn to the question of structuring a regulatory framework governing TPLF, several significant issues crop up. One crucial consideration is whether litigation funders should be licensed as financial service providers. Its suitability pertaining to India requires careful assessment. Establishing a dedicated oversight body to monitor funders and regulate such funding is a topic that requires thoughtful deliberation and discussion. Capital adequacy is another critical concern in TPLF regulation. For instance, Hong Kong’s Code of Practice for Third Party Funding in Arbitration 2019 mandates disclosure of financing details, information on adverse costs, liability for costs, and the extent of funder control. Similarly, India must evaluate if its mechanism of ordering security for costs addresses similar risks in the broader litigation context.

Determining the appropriate level of court involvement and the extent of court approval in TPLF arrangements is a complex question that requires resolution. Identifying the right degree of court intervention and recognising specific arrangements that necessitate such oversight will become foundational pillars in shaping a well-defined regulatory framework. This must reconcile access to justice with preserving judicial integrity.

As India takes active steps toward reimagining justice, TPLF presents both a challenge and an opportunity. By developing targeted and comprehensive regulations tailored to India’s unique legal landscape, the country can foster a thriving ecosystem while safeguarding all parties’ interests. In doing so, India might set a new global standard, balancing financial innovation with the fundamental right to justice.

Kumar Ritwik is Delhi-based Advocate, currently serving as a Judicial Clerk in the Supreme Court of India; Swagat Dash is Assistant Professor at School of Law, Birla Global University (Bhubaneswar) & a PhD Scholar at NLU, Delhi