Answer

Third-Party Litigation Funding (TPLF) in India is emerging as a tool to enhance access to justice, especially for those who lack financial resources to pursue legal battles. According to recent data, about 70% of India’s population faces significant challenges in accessing the justice system, mainly due to high litigation costs. TPLF allows external investors to finance lawsuits in exchange for a share of potential financial outcomes, thereby bridging the gap between justice and affordability.

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Positive Impacts of TPLF on Access to Justice

• Equalising Financial Capabilities: TPLF levels the playing field for economically disadvantaged individuals against well-funded opponents.
  For example: In Bar Council of India v. A.K. Balaji, the Supreme Court acknowledged TPLF as a viable means to democratise access to justice.
• Enhancing Constitutional Rights: TPLF helps ensure that all citizens, irrespective of economic status, can exercise their right to equality before the law, as provided by Article 14 of the Constitution.
  For example: Funding enabled rural women in Madhya Pradesh to contest property disputes they couldn’t otherwise afford.
• Promoting Specialised Litigation: TPLF facilitates legal proceedings in specialised fields, such as environmental protection, by supporting individuals and groups lacking financial means.
  For example: NGOs have used TPLF to bring lawsuits against industries polluting the Yamuna river.
• Strengthening Consumer Rights: By funding consumer cases, TPLF ensures accountability from corporations and improves consumer protection.
  For example: A funded consumer group filed a lawsuit against a food company for misleading nutritional claims, enhancing market transparency.
• Reducing Legal Backlogs: TPLF can expedite legal proceedings by bringing in resources for pending cases, thereby reducing the judicial backlog.
  For example: Maharashtra used TPLF to fast-track several consumer rights cases, improving efficiency.

Negative Impacts of TPLF on Access to Justice

• Selective Case Funding: Funders may prefer cases with higher chances of profit, sidelining socially significant but unprofitable cases.
  For example: A legal aid group in Odisha reported difficulties in obtaining funding for a pro-bono environmental case.
• Influence on Legal Strategy: There is a risk that funders could influence litigation strategy, potentially compromising the interests of the litigant.
  For example: In a property dispute in Gujarat, funders allegedly pressured litigants to settle early for financial gain.
• Conflict of Interest: The profit motive of funders may conflict with the objective of fair justice, leading to ethical concerns.
  For example: A Delhi-based NGO highlighted how funding entities pushed for financial settlements instead of judicial remedies.
• Lack of Regulatory Framework: Absence of comprehensive regulation leads to risks of unethical practices by funders, undermining justice.
  For example: States like Odisha have recognized TPLF but without proper guidelines, leading to inconsistencies in its application.
• Ethical Concerns with Profit Sharing: Sharing litigation proceeds with third parties could create ethical dilemmas, particularly in sensitive cases.
  For example: Concerns arose during a medical malpractice case, where the funder’s demand for a profit share affected victim compensation.

Addressing Challenges Through TPLF

• Reducing Cost Barriers: TPLF can alleviate financial burdens by covering litigation costs for those who cannot afford them.
• Accelerating Case Resolution: By providing funds, TPLF can help expedite case proceedings, addressing judicial backlogs.
• Ensuring Equitable Representation: TPLF can enable individuals to afford competent legal representation, thereby levelling the playing field.
  For instance: A small business in Rajasthan used TPLF to hire a top advocate for a trade dispute.
• Enhancing Legal Awareness: With TPLF support, NGOs can conduct awareness campaigns, informing people of their rights.
• Improving Access in Remote Areas: TPLF can help fund legal services in remote regions, mitigating geographical barriers.
  For instance: TPLF financed mobile legal aid clinics in the tribal regions of Jharkhand.

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Regulatory Measures for Ethical Implementation

• Safeguarding Litigant Interests: Regulations should ensure that funders cannot override litigant decisions or interests.
  For example: Implementing clauses that protect the autonomy of litigants in funding agreements.
• Financial Soundness of Funders: Strict criteria should be established to assess the financial stability of funders.
  For example: The SEBI model of registration could be adapted to evaluate litigation funders.
• Mandatory Transparency: TPLF agreements must be transparent, detailing profit shares and legal rights.
  For example: Adopting a disclosure framework similar to Hong Kong‘s TPLF regulations.
• Establishing an Oversight Body: A dedicated body should oversee funding agreements to prevent exploitation.
  For example: Creating a regulatory board akin to the Insolvency and Bankruptcy Board of India (IBBI).
• Court-Approved Funding Arrangements: Court oversight can ensure that TPLF agreements are fair and ethical.

TPLF presents an opportunity to bridge the access-to-justice gap in India by providing financial support for litigation. However, a well-regulated framework is essential to prevent exploitation and ensure that the core objective of financial inclusion aligns with the principles of fair justice. Balancing innovation with ethical oversight will be key to its success.

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