Third-Party Litigation Funding (TPLF) offers a new approach that is a game-changer, potentially opening courtroom doors for many who have felt shut out.

What is Third-Party Litigation Funding (TPLF)

In India, many people face tough legal battles that they can’t afford. For example, tribal villagers in Odisha are trying to take on a big industrial company that is harming their environment. Their case is also strong, but they lack the money to fight it.

• This is where Third-Party Litigation Funding (TPLF) comes in. TPLF allows investors to pay for these legal battles in exchange for a share of any money won in the case. 
• The 1876 Privy Council judgement in Ram Coomar Coondoo v. Chunder Canto Mookerjee allows TPLF in India, rejecting old English champerty(which prohibited third-party funding of litigation) laws.

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Benefits of Third-Party Litigation Funding (TPLF)

• Potential Equaliser: The SC in Bar Council of India v. A.K. Balaji described TPLF as “a potential equaliser in the courtroom,”.
  • The ruling emphasised that TPLF is permissible as long as lawyers are not the ones financing the cases. 
• Improvement of Constitutional Guarantees: While the Constitution advocates for equality, its application often raises questions, for instance when wealthy individuals and middle-class litigants face off in court. 
• Facilitation of Specialized Litigation: In complex fields such as medical malpractice and intellectual property rights (IPR), TPLF ensures that valid claims are heard rather than being stifled by high litigation costs.
• Consumer Protection: In metropolitan areas, TPLF empowers consumer groups to file lawsuits against food adulterators, ensuring market accountability and promoting enhanced safety standards.
  • For instance, the case of Johnson & Johnson’s talcum powder and asbestos contamination exemplifies the need for protections against product adulteration.
• Empowerment of Tribes and NGOs: TPLF allows tribal communities, supported by NGOs, to challenge mining mafias, promoting environmental protection and safeguarding the rights of indigenous populations. 
  • For example, the Dongria Kondh tribe’s struggle against the mining company, Vedanta.
• Enhancement of Labour Rights: TPLF could empower labour groups to collectively address unjust practices, leading to improved working conditions and stronger protections for workers’ rights across various sectors. 
  • The 2016 case involving Maruti Suzuki workers highlights the importance of such initiatives.
• Support for Startups: TPLF provides Bengaluru’s tech startups with the financial resources to withstand legal challenges from industry giants, allowing innovation to thrive without the fear of financial depletion.
• Addressing Pending Cases: TPLF can assist in tackling the current backlog of approximately 40 million pending cases across India, including around 80,000 cases at the Supreme Court.
• Enhancing Corporate Accountability: TPLF promotes accountability among large corporations and entities by enabling individuals and groups to take legal action against malpractice or wrongdoing, thereby fostering a more just legal environment.

Challenges and Concerns

• Cherry-Picking Cases: There is a risk that funders may prioritise more profitable cases, potentially neglecting socially significant but less lucrative claims. 
  • This can undermine the broader objective of TPLF to democratise access to justice.
• Funder Influence: Concerns exist regarding the extent of control that funders should have over legal strategies. 
  • Careful regulation is required to ensure that client interests remain paramount and that funders do not unduly influence case outcomes.
• Need for Regulation: Although some Indian states, such as Maharashtra, Madhya Pradesh, Odisha, and Gujarat, have recognized TPLF, there is currently no comprehensive national policy or regulation governing its implementation. 

Proposed Measure

• Protecting Client Rights: Establish regulations that safeguard the rights of clients engaging with funders.
• Ensuring Financial Soundness and Ethical Behaviour: Assess and verify the financial stability and ethical conduct of funding entities.
• Mandating Transparency: Implement measures that require transparency in funding agreements and limit funders’ profit margins to prevent exploitation.
• Establishing a Dedicated Oversight Body: Create an oversight body to monitor funding arrangements and ensure compliance with regulations.
• Court Involvement: Determining the appropriate level of court oversight in TPLF agreements is essential. 
• International Best Practices: Hong Kong’s 2019 Code of Practice for TPLF in arbitration requires disclosure and cost liability, ensuring transparency  offering a model for India to consider.

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Conclusion

Third-Party Litigation Funding offers a promising avenue to improve access to justice in India. A well-regulated framework can safeguard rights, while ensuring that financial innovation does not compromise judicial integrity.

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