Syllabus
GS Paper 2 – Structure, organization and functioning of the Executive and the Judiciary.
Context
In a nation where ‘justice for all’ has long been a constitutional dream, Third-Party Litigation Funding might help turn it into reality
Source
The Hindu | Editorial dated 17th October 2024
Reimagining access to justice
Third-Party Litigation Funding (TPLF) is emerging as a transformative concept in India’s legal system, offering a potential solution to the increasing costs of litigation. By allowing third parties to fund legal cases in exchange for a share of the winnings, TPLF is seen as a means to democratize access to justice, especially for those who lack financial resources.
However, as this concept grows, it presents both opportunities and challenges, requiring careful regulation to ensure its fair and ethical application.
Significance of TPLF in India
- Access to Justice: TPLF can open the doors of justice to individuals and communities who previously could not afford litigation, such as small shopkeepers or tribal villagers taking on large corporations.
- Potential Equalizer: As noted in the Supreme Court’s Bar Council of India v. A.K. Balaji case, TPLF has the potential to level the playing field in the courtroom by providing resources for underfunded parties to fight legal battles.
- Support for Specialized Litigation: Fields such as medical malpractice and intellectual property rights (IPR) often require expensive expert testimony.
- TPLF can make it easier to pursue such cases, which might otherwise go unheard due to financial constraints.
Evolution of TPLF
- Judicial Green Signal:
- The Supreme Court’s ruling in Bar Council of India v. A.K. Balaji clarified that TPLF is permissible as long as lawyers are not funding cases.
- This decision builds on the precedent set in the 1876 Privy Council case, Ram Coomar Coondoo v. Chunder Canto Mookerjee.
- Champerty and India:
- Old English laws against champerty (third-party funding) do not apply in India, allowing TPLF to flourish in the Indian legal context, providing much-needed financial relief to litigants.
- State-Level Recognition:
- States like Maharashtra, Madhya Pradesh, Orissa, and Gujarat have recognized third-party financiers through amendments to their civil procedure codes, signaling a gradual acceptance of TPLF.
Challenges and Concerns
- Profit-Driven Selection: There is concern that TPLF funders will focus only on lucrative cases, leaving socially significant but less profitable cases, such as environmental protection or public interest litigation (PIL), unsupported.
- Funders’ Influence on Case Strategy: Questions arise about how much control funders should have over legal strategies, which could potentially compromise the independence of the litigant’s decision-making.
- Ethical and Financial Concerns: Ensuring that funders are both financially sound and ethically upright is crucial. Without proper safeguards, TPLF could exploit vulnerable litigants, prioritizing profits over justice.
Regulatory Needs for TPLF
- Comprehensive National Framework:
- India lacks a unified regulatory framework for TPLF.
- Establishing this is essential to ensure transparency, client protection, and ethical conduct of funders.
- Learning from Global Models:
- Countries like Hong Kong have implemented codes for TPLF, requiring disclosure of financing details and funder liability.
- India must assess whether similar regulations are needed for broader litigation beyond arbitration.
- Capital Adequacy:
- Regulations must ensure that funders have sufficient capital to cover litigation costs and liabilities.
- This would protect litigants from funders who may default mid-case, leaving plaintiffs vulnerable.
Court Involvement in TPLF
- Extent of Oversight:
- A critical issue is determining how much involvement the courts should have in TPLF arrangements.
- Court approval may be necessary in specific cases to ensure fairness and protect the integrity of the judicial process.
- Security for Costs:
- India’s existing provisions for ordering security for costs need to be evaluated to determine if they sufficiently address the risks associated with TPLF in general litigation.
- Balancing Access and Integrity:
- While TPLF expands access to justice, courts must ensure that such financial arrangements do not undermine the judicial process or create conflicts of interest.
Impact on India’s Legal System
- Consumer Protection: TPLF could strengthen consumer rights by enabling litigation against unethical corporations, such as food adulterators or producers of counterfeit goods.
- Environmental and Social Justice: Communities affected by environmental degradation or social injustice may find relief through TPLF, enabling them to challenge powerful industries without fear of financial ruin.
- Reducing Case Backlogs: With over 40 million pending cases in India’s courts, TPLF could alleviate the financial burden on litigants, helping to expedite cases that might otherwise be delayed due to lack of funds.
Conclusion
Third-Party Litigation Funding (TPLF) holds great promise for making justice more accessible, especially for marginalized groups and individuals who cannot afford to litigate. However, the challenges it poses, such as ethical concerns and potential funder control, require a comprehensive regulatory framework tailored to India’s legal environment.
With proper oversight and safeguards, TPLF could revolutionize India’s justice system, making it more equitable and effective while setting a global standard for balancing financial innovation with the right to justice.
Related PYQ
What are the major changes brought in the Arbitration and Conciliation Act, 1996 through the recent Ordinance promulgated by the President? How far will it improve India’s dispute resolution mechanism? Discuss. [ UPSC Civil Services Exam – Mains 2015]
Practice Question
Discuss the potential benefits and challenges of Third-Party Litigation Funding (TPLF) in India. Suggest measures to regulate TPLF for ensuring access to justice while maintaining judicial integrity? [250 words]
Approach:
- Introduction:
- Start with a brief definition of Third-Party Litigation Funding (TPLF).
- Mention its growing relevance in India’s legal system, especially in improving access to justice.
- Body:
- List the key advantages of TPLF, such as increased access to justice, leveling the playing field, and supporting complex litigation.
- Use examples, such as small litigants being able to challenge large corporations, to illustrate its positive impact.Discuss the potential challenges, such as profit-driven case selection, funder control over legal strategy, and lack of regulation.
- Provide evidence or reasoning to explain why these challenges could undermine the fairness and integrity of the judicial process.
- Suggest regulatory measures like establishing a national framework, ensuring transparency in funding agreements, and setting limits on funders’ profits.
- Conclusion:
- Summarize the importance of TPLF in making justice more accessible while acknowledging the need for careful regulation.