Case for third party funding

Source: The Hindu

Relevance: To study the arbitration methods.

Synopsis: Third-party funding in Arbitration should be explored, with sufficient caution, to expedite access to justice.

Third-Party Funding in Arbitration/Litigation Funding

• It is the process in which someone who is not involved in an arbitration provides funds to a party to that arbitration in exchange for an agreed return.
• This practice is widely used in commercial arbitration, as this process improves access to justice by providing advance funding & support for the expensive, lengthy litigation process.
• Historically, this form of funding was prohibited under doctrines of maintenance & champerty

Present Scenario

• Now, the rules have been relaxed in various jurisdictions including the UK, the US, Canada and Australia as more focus is on access to justice.
• In India, “non-lawyer third-party funding” is lawfully admissible, i.e. where there is no personal interest of the participating advocate.
• The practice of 3^rd party funding must become prevalent in India as it will not only open access to the court system but also businesses to manage their litigation position in a better way.

The debate around third party funding

• The main area of concern is the disclosure of the type of funding.
• We can learn from Hong Kong Inspirational Arbitration Centre Rules. The rules stipulate that when a funding agreement is concluded, the funded party must notify the other party. After that, the arbitral tribunal or emergency arbitrator in writing of the fact that a financing agreement has been concluded, along with the identity of 3^rd party sponsor.

Way forward

• We have seen organizations come up like the Indian Association for Litigation finance. So, India should explore third-party funding, keeping in view it increases access to justice