Why Litigation Funding is Indispensable to the Pursuit of Justice

The financial uncertainties brought about by COVID are one driver for the increased use of third-party legal finance. Businesses are becoming insolvent in record numbers. Even those with strong cash reserves are burning through them at unprecedented rates. How does legal funding help?

Outlook India details that realistically, legal proceedings are often influenced by the financial status of the parties involved. Well-monied defendants can drag out a meritorious case until the plaintiff’s resources dry up, forcing a lowball settlement or even ending the case altogether. Litigation Finance removes that disparity, allowing cases to be tried based solely on merit.

Litigation funding agreements can vary, but they generally cover costs relating to a case—including lawyer’s fees, experts, and filing fees among other expenses. Money is provided on a non-recourse basis. So if the plaintiff loses, the funder may lose its entire investment, but the client pays nothing. If the case wins, part of the award is paid to the funder at a rate agreed upon in the funding agreement.

India, like many countries, does not have a regulatory regime in place to govern legal funding. The practice has been approved in principle, but funders are largely self-regulating. Contingency fee arrangements are still banned in India, which could actually create an increased need for legal finance.

There is a dearth of international funders operating in India, and none are looking to fund smaller cases. As such, average citizens, and even the mid-market segment in India, have gone underserved. There is literally one funding company for such clients—which seems to portend the arrival of newcomers to the market.

Legal finance isn’t for business-related lawsuits or class actions. Litigation funding can be used in a diverse array of case types including harassment, whistleblowers, privacy breaches, and more. Litigation funding is, when used properly, a win-win for justice and the public.