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Third-Party Litigation Funding (TPLF) can democratize access to justice and empower marginalized communities in India.
The objective of “justice for all” has been part of the Constitution, however, many people find it hard to access legal help, often because of high costs.
Third-Party Litigation Funding (TPLF) could help those individuals or groups who have struggled to afford legal battles. It works in an ideal where an investor pays for the legal expenses in return for a share of any winnings from the case.
TPLF is when someone who is not involved in a lawsuit provides funds to cover the legal costs of one of the parties involved; a person or business can pursue a legal claim even if they don’t have the funds to pay for it.
The funder gets a part of the finances if the case is won, but they may lose their entire investment if the case is lost.
Working MechanismThe complainant and the investor enter into a contract where the investor agrees to cover some or all of the litigation costs, including lawyer fees, court fees, and other related expenses. The investor provides the necessary capital to the complainant, allowing them to pursue their case without financial stress. If the complainant wins the case or reaches a settlement, the funder receives a pre-agreed percentage of the recovery amount. If the complainant loses, the funder loses their investment. |
The legal system in India has huge pending cases; nearly 80,000 cases are pending in the Supreme Court alone and around 40 million across the country. Many people can’t afford to take legal action. TPLF can provide these people access to justice by covering the costs.
TPLF could improve consumer rights, protect the environment, and hold businesses and governments more accountable by giving individuals and groups the power to challenge unfair practices in court.
Investors might only fund selected cases that will be profitable for them, which will neglect important but less lucrative cases. There are concerns about influence of the funders over case strategy and litigation process.
If a funder backs a case but doesn’t have enough money to cover costs when things go wrong, leaving the complainant stuck. Therefore, need to ensure that funders are financially capable, so they don’t cause more harm than good.
Maharashtra and Gujarat have introduced changes to amend civil procedure codes to recognize TPLF, however, India still lacks a comprehensive national framework for it.
Critics argue that it can lead to an increase in flighty lawsuits and obstruct the court system, as funders might encourage litigation to maximize their returns.
Funders are essentially investing in lawsuits, much like a bank invests in a business. They make a profit if the case wins, but this involves risks too. Regulating funders like financial institutions might offer more protection for everyone involved.
In Hong Kong, funders are required to share details about their financial situation, this helps everyone involved understand who will pay for costs if the case is lost. India needs similar rules to protect petitioners.
A dedicated oversight body could ensure that funders follow the rules, don’t exploit complainants, and maintain ethical standards. If there’s no proper supervision, funders could take unfair advantage of people, especially the vulnerable, who need legal help.
TPLF, like any new idea, also comes with several potential concerns that need to be carefully balanced with its positive outcome.
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PRACTICE QUESTION Q.Critically analyze the potential impact of Third-Party Litigation Funding (TPLF) on the legal system. How might it affect the conduct of complainants, defendants, and the overall litigation process? |
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