Trending Now
Commercial Special Features

An LFJ Conversation with Kundan Shahi, Founder and CEO of LegalPay

By John Freund |

LegalPay is the only company in India which provides different financing solutions to businesses for their legal services and/or litigations. Founded by Kundan Shahi in 2019, LegalPay now has a team of more than 100 staff managing more than USD 400 million of claims under management.

Kundan Shahi is an alumnus of IIM Bangalore’s startup incubator, NSRCEL and had perviously founded a LegalTech company. He deeply believes in relieving the burden on Indian judiciary, and to further that cause he supports Bharat Disputes Resolution (BDR), India’s largest online dispute resolution platform.

Below is our conversation with Mr. Shahi:

What is the litigation funding landscape like in India? What are the unique challenges and opportunities for funders operating there? 

At present, litigation finance in India is at an embryonic stage, reflective of its burgeoning legal expense market. A combined total of around 40 billion dollars encompasses both individual and business legal expenditures, a figure poised for further escalation with the country’s rapid economic expansion and the surge in cross-border transactions. The imminent ascension of India to become the world’s third-largest economy is projected to further amplify the legal expense market’s growth. Distinguishing India from other jurisdictions is the absence of a contingency fee model, necessitating the demand for alternative financing avenues. The concept of third-party funding (TPF) was initially alien to the legal landscape, often perceived as illicit by legal practitioners. The awareness around litigation finance has been minimal until recently.

What types of cases does LegalPay fund? What case aspects do you look for? What are some of the things you look to stay away from?

LegalPay has made substantial investments to cultivate awareness within the business sphere, elucidating the financial dimensions of litigation. This concerted effort has yielded a notable increase in litigation finance inquiries from businesses. In contrast to conventional jurisdictions where stakeholder interests are aligned (plaintiff, lawyer, funders), in India, only funders and plaintiffs share a common interest. We are a low trust society with price sensitivity. Consequently, possessing deep pockets alone does not guarantee access to lucrative opportunities. To navigate this landscape, an innovative blend of technology and distribution strategies is imperative for robust deal origination.

One of the major concerns for funders is case duration. India is not known for speedy case resolutions. How do you manage this risk factor?

The reputation of India’s judicial system for protracted case resolutions is acknowledged, yet empirical data reveals incremental improvements. While perceptions linger, the expansive realm of disputes provides ample room for astute selection. Adaptation is key in this price-sensitive climate; prioritizing plaintiff interests ensures risk management remains a cornerstone. Businesses have started understanding the financial perspective of litigation which encourages them to opt for alternative disputes resolutions.

You recently launched Contract Defense, a free service protecting businesses from disputes arising from BNPL. What can you tell us about this? 

Our recent introduction of “Contract Defense” serves to bolster trust and provide businesses with a safety net against disputes arising from the contract bought using our framework. This innovative offering extends an interest-free credit line to manage legal expenses and covers initial legal costs stemming from contractual agreements facilitated through our BNPL platform. This engagement serves as a prelude to forging robust relationships, positioning us to offer litigation finance when needed. To use Contract Defense, all the customer needs to do is create a contract through any lawyer or law firm in India and pay for it using our BNPL payment method. If any legal disputes arising from the contract, the customer can simply transfer the legal expense to LegalPay, and we will cover the cost of all possible disputes.

What are your predictions for the future of litigation funding in India? How will this market evolve?

Forecasts for the litigation funding landscape in India remain resoundingly positive. As awareness burgeons, businesses are keen to transfer the financial risk of litigation to platforms such as ours. The aftermath of a Delhi High Court judgment has triggered heightened discussions and inquiries, attracting international funders and law firms seeking symbiotic collaborations. The expansive market paves the way for coexistence and flourishing among several prominent litigation funders, contingent upon their adept adaptation to the intricacies of the Indian landscape.

In conclusion, the canvas of litigation funding in India is unfolding with remarkable potential. The convergence of economic growth, legal dynamics, and the desire for risk transfer converge to paint a promising trajectory for this evolving sector.

Commercial

View All
Commercial Regulatory Issues

Legislation to ensure the enforceability of LFAs is progressing smoothly through Parliament

By John Freund |

The following is a contributed piece by Tom Webster, Chief Commercial Officer at Sentry Funding.

So far, the Litigation Funding Agreements (Enforceability) Bill has been passing through Parliament without a hitch.

The government is bringing the legislation in response to the Supreme Court’s decision last summer in PACCAR Inc & Ors v Competition Appeal Tribunal & Ors [2023] UKSC 28, which called into question the enforceability of LFAs.

The Bill was briefly introduced into the House of Lords on 19 March, and was debated at second reading on 15 April. During the debate, while some peers discussed the need for regulation of the litigation funding industry and for careful consideration of whether the retrospective nature of the legislation was justified, no peers opposed the Bill – and many welcomed it.

More recently, during scrutiny at grand committee on 29 April, the relatively small number of peers who attended the session broadly supported the Bill, and several spoke in favour of the need for its provisions to be retrospective.

In terms of the Bill’s drafting, the government proposed some small changes at committee stage, which were waved through by peers. The most significant was to address a potential problem with the original drafting where the LFA relates to the payment of costs rather than funding the provision of advocacy or litigation services.

The problem was that, in the original wording, it could be argued that the Bill only applied to the funding of costs that relate to court proceedings, but not those relating to arbitration, or settlements. This has now been resolved by new wording to make clear that an LFA may relate to the payment of costs following court, tribunal or arbitration proceedings, or as part of a settlement. An LFA may also relate to the provision of advocacy or litigation services.

Meanwhile another government amendment was aimed at avoiding problems for litigants-in-person, by ensuring that the definition of LFAs in the Bill includes agreements to fund the expenses of LiPs, for example where they need to pay for an expert’s report.

During grand committee, peers also expressed their approval of the broad terms of reference that have now been published by the Civil Justice Council for its review of litigation funding, which will include an examination of whether the sector should be regulated; and if so, how. Peers commended the speedy timescale that the CJC has set itself, aiming to produce an interim report by the summer, and a full report by summer 2025.

As the Litigation Funding Agreements (Enforceability) Bill continues its journey through Parliament and the CJC begins work on its review, there are clearly significant changes on the way for the litigation funding sector in the UK.

Read More
Commercial Regulatory Issues

Rowles-Davies: Retrospective Provision in Litigation Funding Bill is ‘Fundamentally Flawed’

By John Freund |

In an article shared on LinkedIn, Nick Rowles-Davies, founder and CEO of Lexolent, makes the case against the retrospective aspect of the UK government’s Litigation Funding Agreements (Enforceability) Bill. Whilst acknowledging that many within the industry disagree with his position, Rowles-Davies argues that ‘the Bill should be prospective only and that the retrospective element is fundamentally flawed.’

Rowles-Davies summarizes his extensive article into the following key points:

  1. ‘The starting point for any consideration of the Bill must be firstly to correct the various inaccurate Supporting Documents (to the Bill) such that the law as it stands, and has always stood, is properly reflected. 
  2. The Government has put forward no credible justification to support the retrospective provision in the Bill.
  3. When considered under the true set of facts, this legislation appears to be incompatible with the ECHR. 
  4. The justification for the Bill’s prospective elements and its (arguably unprecedented) retrospective aspect must be considered separately. The Supporting Documents grossly misrepresent the position. Save for pure value transfers from previously funded parties to existing funders, what the Bill properly seeks to achieve can be accomplished through prospective only legislation. 
  5. If retrospectivity survives, it is likely that the matter will come before the courts quickly thereafter in relation to the ECHR.’

Rowles-Davies argues in the article that ‘the Supporting Documents to the LFA Bill provide absolutely no evidence of legal precedent to support the retrospective aspect of the Bill.” He goes on to say that not only is this bill ‘unprecedented’, but it also fails to provide ‘credible “public interest” justification for the retrospective aspect.’ 

In the conclusion of the article, Rowles-Davies calls on both chambers of Parliament to ‘take proper time to explore the foundation upon which the Bill rests and then test its contents after it has been repaired.’ Furthermore, he argues that ‘the positioning of the Bill is disrespectful to a busy Parliament tasked with addressing far more pressing global, social, and public interest matters.’

Commercial Regulatory Issues

Bills Targeting Litigation Finance Disclosure and Foreign Funders Make Progress in Louisiana

By John Freund |

Reporting by Bloomberg Law covers the campaign to introduce new rules governing litigation funding in the state of Louisiana, with proponents of the legislation sensing an opportunity to make progress since the state elected a new governor, Jeff Landry. The two bills making their way through the Legislature are: HB336, which would create a Litigation Financing Disclosure Act, and SB355, which would enact ‘transparency and limitations on foreign third-party litigation funding’. 

In an interview with Bloomberg, Representative Emily Chenevert ,who brought HB336, explained that the turnover in elected representatives provided a fresh opportunity, saying: “The appetite was there already within the legislature and so now it’s like, let’s attempt this and let’s see with a new House and some new senators what could happen.” Dai Wai Chin Feman, managing director at funder Parabellum Capital, spoke out in opposition to Chenevert’s bill but said that SB355 was “acceptable to our industry.”

HB336 would require any party in a civil action to disclose the existence of a litigation financing agreement, whilst redacting the financial details of the agreement, and would make all financing arrangements ‘permissible subjects of discovery’. The bill also prohibits funders from controlling or making any decisions in the proceedings, stating that ‘The right to make these decisions remains solely with the plaintiff and the plaintiff's attorney in the civil proceeding.’

SB355 requires any foreign litigation funder involved in a civil action in Louisiana to disclose its details to the state’s attorney general (AG), and to provide the AG with a copy of the funding agreement. Similarly to HB336, this bill would prohibit the foreign funder from controlling the legal action in any way and also prohibits the funder from being ‘assigned rights in a civil action for which the litigation funder has provided funding’.

HB336 has been approved by the state House and was referred to the Senate Judiciary Committee, whilst SB355 has cleared the majority of procedural hurdles and now awaits a vote by the House.