Litigation Funding: A Brief History

Litigation funding- a practice once restrained by legal doctrines that has now become an indispensable tool for accessing justice. In this article, we explore the key milestones in the United Kingdom, Australia, and beyond. We will delve into the story of how third-party funding emerged from the shadows of prohibition to the forefront of legal proceedings.

Third-party litigation finance is young—but not that young. The origins of litigation funding in the United Kingdom can be traced back to the 1967 Criminal Law Act. The regulatory change redefined Maintenance (providing funding for a legal case by individuals not party to it) and Champerty (an agreement in which a person with no previous interest in a claim, finances it with a view to sharing the disputed property if the claim succeeds) offenses. Having once been viewed as offenses, this change now classified them as neither tort nor crimes against public policy.

Although the Act introduced the potential for litigation funding in specific situations, a lack of clarity regarding these circumstances initially limited its growth in the country. However, this restriction was temporary, lasting only for a few years.

The 1990s: A Decisive Era for Litigation Funding

 Down under, modern litigation funding took root in Australia during the mid-1990s. Fuelled by insolvency legislation recognising legal claims as corporate assets and the legalisation of class-action lawsuits in 1992, the landscape shifted dramatically. In 2006, the Australian High Court validated third-party litigation funding, solidifying its legitimacy and place in the legal realm.

Simultaneously, the United Kingdom experienced its own transformation with the 1990 passage of the Courts and Legal Services Act. This landmark legislation lifted the ban on conditional fee agreements (CFAs), bringing in the era of the classic “no-win, no-fee” arrangements that we know so well today.

Global Expansion and Recent Developments:

 Further afield, Singapore and Hong Kong emerged as trailblazers, becoming the first Asian countries to legalise third-party funding. In India, while specific legislation on third-party funding is absent, contracts of champerty and maintenance are permitted unless used for improper purposes.

Across most European civil law jurisdictions, litigation funding contracts are governed by the principle of freedom of contract. Germany, for example, witnessed the peak of its litigation funding market in the late 1990s, prompting legal requirements for lawyers to make claimants aware of litigation funding as an option. Something that is being practised more and more here in the UK.

From legal restrictions and societal judgements, litigation funding has emerged as a legitimate and crucial instrument for ensuring access to justice. As this practice gains global prominence, it stands as a beacon of support for individuals and entities seeking financial assistance to pursue their legal claims. Making access to justice more accessible than ever.