Is Litigation Finance Really so New?

Third parties funding legal cases is certainly not new. In fact, the practice has existed since the middle ages. Once called ‘champerty and maintenance,’ third party funding of claims was banished by much of the globe until just a few decades ago. Comparatively, legal funding isn’t that different than the types of third-party financing used by individuals and businesses to meet normal business needs.

Validity Finance details that third-party legal funding can take many forms, including pro-bono litigation. Insurance subrogation is another form of funding that assists claimants and increases access to justice. Notice that neither pro-bono litigation nor insurance subrogation are considered flaws or bugs in the legal system, but rather, necessary and helpful features.

Corporate claim holders make use of litigation funding, even though they have enjoyed access to capital markets for some time. Even fledgling companies may be able to raise funds by selling litigation assets—such as patent cases. While not every company has a need for third-party legal claims, most could benefit from the practice if they so choose.

Looking at the available evidence, it’s clear that third-party legal finance levels the playing field to a great extent. Big businesses have less of an advantage over smaller ones, and even less over individuals or a class of claimants with a meritorious case. Limiting or banning litigation finance would widen the chasm between the haves and have-nots. In the legal landscape, that leads to rampant injustice for those who can afford it least.

The fact remains, third-party legal funding has been part of the legal system for almost as long as legal systems have existed. Modern litigation funding is a natural evolution that now includes monetizing claims and awards, enforcing judgements, and getting collective actions off the ground. In the end, anything that increases access to justice is a net gain for society.