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UPDATE: Did you know 3rd party lit funding is actually permitted in India? • SC very quietly opened door to 3rd-party lit funding in foreign law firms judgment

One possible face of litigation funding (the other is less ugly)One possible face of litigation funding (the other is less ugly)

The Supreme Court has today, very softly in paragraph 35 out of 46 in its judgment that allowed foreign lawyers limited rights to fly-into India, opened the door to third-party litigation funding.

The Supreme Court bench of justices AK Goel and UU Lalit held:

35. In India, funding of litigation by advocates is not explicitly prohibited, but a conjoint reading of Rule 18 (fomenting litigation), Rule 20 (contingency fees), Rule 21 (share or interest in an actionable claim) and Rule 22 (participating in bids in execution, etc.) would strongly suggest that advocates in India cannot fund litigation on behalf of their clients.

There appears to be no restriction on third parties (non-lawyers) funding the litigation and getting repaid after the outcome of the litigation. In U.S.A., lawyers are permitted to fund the entire litigation and take their fee as a percentage of the proceeds if they win the case. Third Party Litigation Funding/Legal Financing agreements are not prohibited.

In U.K., Section 58B of the Courts and Legal Services Act, 1990 permits litigation funding agreements between legal service providers and litigants or clients, and also permits third party Litigation Funding or Legal Financing agreements, whereby the third party can get a share of the damages or “winnings”.

Read full judgment here.

Third party litigation funding has become part-and-parcel of big corporate disputes in other countries, such as the UK and US, and more recently also Hong Kong and Singapore.

It allows a third-party insurance companies or others to assess the likelihood of a claim, and then agree to cover the legal costs of pursuing (or defending) a claim.

It can therefore be valuable in reducing litigation risk and exposure, if one has a strong case.

Of course, in India, the more realistic risk both for litigants and insurers is that most litigation is completely unpredictable, and could take years, decades or lifetimes; insurance companies are unlikely to have an appetite for such long exposure.

However, more recently and infamously, third-party funding was also used by controversial billionaire Peter Thiel to run the colourful website Gawker out of business, by enabling a defamation suit against the publication by the wrestler Hulk Hogan.

Update 16 March 2018: A commenter below has pointed out that indeed, third party litigation funding is NOT banned in India. Relevant is this case from 1954:

On 20th December, 1952, he entered into an agreement with a client whereby the client undertook to pay him 50 per cent. of any recoveries he might make in the legal proceedings in respect of which he was engaged. On this being reported to the High Court the matter was referred to the Bombay Bar Council and was investigated by three of its members under section 11(1) of the Bar Councils Act. They recorded their opinion that this amounted to professional misconduct.

While this senior advocate was suspended, the court noted:

11. Now it can be accepted at once that a contract of this kind would be legally unobjectionable if no lawyer was involved. The rigid English rules of champerty and maintenance do not apply in India, so if this agreement had been between what we might term third parties, it would have been legally enforceable and good. It may even be that it is good in law and enforceable as it stands though we so not so decide because the question does not arise; but that was argued and for the sake of argument even that can be conceded. It follows that there is nothing morally wrong, nothing to shock the conscience, nothing against public policy and public morals in such a transaction per se, that is to say, when a legal practitioner is not concerned. But that is not the question we have to consider, However much these agreements may be open to other men what we have to decide is whether they are permissible under the rigid rules of conduct enjoyed by the members of a very close professional preserve so that their integrity, dignity and honour may be placed above the breath of scandal. That is part of the price one prays for the privilege of belonging to a kind of close and exclusive “club” and enjoying in it privileges and immunities denied to less fortunate persons who are outside its fold. There is no need to either its portals and there is no need to stay, but having entered and having elected to stay and enjoy its amenities and privileges, its rules must be obeyed or the disciplinary measures which it is entitled to take must be suffered. The real question therefore is whether this kind of conduct is forbidden to the elect or whether, if it was once forbidden, the ban has since been removed, either directly or by implication, be legislative action.

Photo by Miguel Discart

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1
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Like +2 Object -0 Poor reader 14 Mar 18, 09:41
It appears that the author of this article does not know how to read decisions.

The entire article relies on para 35 to hold that this is what the SC has said. However if you look at the decision you will find that till para 36 the SC has only noted the contention of parties and other background. The analysis begins at para 37. In fact just before para 37 there is a heading "consideration of the issues" wherein the SC deals with the issues. In these paras (i.e. 37 onwards) there is no such discussion or finding as the author concludes.

And the author here goes on to irresponsibly comment how SC has ... based on this para 35.
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1.1
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Like +3 Object -5 kianganz 14 Mar 18, 10:12
Thanks for your comment - I agree it's certainly not ratio, and only marginally obiter, but we never implied the SC was setting a landmark precedent here.

However, by reciting this argument without disagreement as apparently established matter of law and fact, the SC has clearly left the door a tiny bit open to third party litigation funding, which I didn't know had even been mentioned by a court before.

(Or to foreign lawyers funding Indian litigation??)

Of course, caveat emptor to the first one to offer or buy such services.
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1.1.1
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Like +5 Object -2 Kian Ganz -ju 14 Mar 18, 10:30
Kian - thank the world you aren't a lawyer, if that is your reasoning. But you could most likely be a 'great ju-dge', like the famous one in the recent past, flights of legal fancy, obscure stories and gems hidden in judgements, and the likes...
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1.1.1.1
Like +9 Object -1 Ermmm.. 14 Mar 18, 11:19  interesting
Bhai jaan, this is the issue with all of us lawyers. Ridiculously hypocritical. Khud we will go and say "your lordhips may please see para 35, where your hon'ble 'brothers' have noted the contentions of my learned 'brother' that third party funding is not expressly disallowed"

This happens all the time in court.

And in any case, Kian is right about opening the door. That is exactly what has happened over the years with a lot of our judicial jurisprudence, including in this saga itself.
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1.1.1.2
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Like +2 Object -0 Other Guy 14 Mar 18, 19:38
Umm.. From what I remember, Kian actually is a UK qualified lawyer. But never mind.
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1.2
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Like +3 Object -0 Aghast 14 Mar 18, 11:58
Classic mentality of lawyers who do not understand the consequence of their interpretation, as is the case with the justices that have delivered this verdict.

Before you go on and blast the author for not knowing how to read a judgement, please note that the averments being recorded are made by the BCI counsel, therefore reflects the stand of the BCI. The SC on numerous occasions has already expressed the power of the BCI to regulate the legal profession in India.

So 2 things:

1) By recording the averment without in any way directly or indirectly raising question on it, the court HAS allowed for the same to become a part of the obiter as it does use these averments in achieving its final pronouncement.

2) Even if that is not true, the BCI has gone on record to make ti clear that this is its stand and therefore opened the doors for third party funding of litigation.

So please Sir, before you go on bashing, think.

(Oh and in case you are one of those posh lawyers with papa's money, please dont troll me for my english or the way I have framed this comment, just tell me whether point 2 above is wrong?)
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1.2.2
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Like +0 Object -0 CPC? 14 Mar 18, 14:05
I do not know if this will close the issue one way or the other but thought better to put it across the wall.

CPC - Section 11 - Explanation 4 states "Any relief claimed in the plaint, which is not expressly granted by the decree, shall, for the purposes of this section, be deemed to have been refused"

Does it mean any argument made and not specifically agreed by the judges is deemed to be rejected?

No sure if the law is so but no harm in debating it further.
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1.2.2.3
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Like +0 Object -0 Nope 14 Mar 18, 15:19
Para 35 does not seek a relief, it merely places the stand of the BCI before the SC, which the SC is pleased to record in its judgment. So till such time there is a clarification in this regard, the rule of estoppel should apply. Basically, since the BCI has made this representation, I as a citizen of the country can not be hauled up by the BCI for starting an ambulance chasing business.
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2
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Like +0 Object -0 Guest 14 Mar 18, 15:15
good for the hogans
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3
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Like +2 Object -0 Nothing Nee 16 Mar 18, 00:31
An agreement by a third party to finance litigation is a champertous agreement, which has been permissible in India since 1955 unless court finds it is opposed to public policy. Please see 1955 1 SCR 490.
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3.1
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Like +0 Object -0 Silo 16 Mar 18, 11:54
Can someone verify that please, I don't have access to the judgment.
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3.1.1
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Like +0 Object -0 kianganz 16 Mar 18, 12:02
Very interesting, thanks for sharing #3, will update the article. This seems to be the one, from 1954: https://indiankanoon.org/doc/248671/

Quote:
On 20th December, 1952, he entered into an agreement with a client whereby the client undertook to pay him 50 per cent. of any recoveries he might make in the legal proceedings in respect of which he was engaged. On this being reported to the High Court the matter was referred to the Bombay Bar Council and was investigated by three of its members under section 11(1) of the Bar Councils Act. They recorded their opinion that this amounted to professional misconduct.
While this senior advocate was suspended, the court noted:

Quote:
11. Now it can be accepted at once that a contract of this kind would be legally unobjectionable if no lawyer was involved. The rigid English rules of champerty and maintenance do not apply in India, so if this agreement had been between what we might term third parties, it would have been legally enforceable and good. It may even be that it is good in law and enforceable as it stands though we so not so decide because the question does not arise; but that was argued and for the sake of argument even that can be conceded. It follows that there is nothing morally wrong, nothing to shock the conscience, nothing against public policy and public morals in such a transaction per se, that is to say, when a legal practitioner is not concerned. But that is not the question we have to consider, However much these agreements may be open to other men what we have to decide is whether they are permissible under the rigid rules of conduct enjoyed by the members of a very close professional preserve so that their integrity, dignity and honour may be placed above the breath of scandal. That is part of the price one prays for the privilege of belonging to a kind of close and exclusive "club" and enjoying in it privileges and immunities denied to less fortunate persons who are outside its fold. There is no need to either its portals and there is no need to stay, but having entered and having elected to stay and enjoy its amenities and privileges, its rules must be obeyed or the disciplinary measures which it is entitled to take must be suffered. The real question therefore is whether this kind of conduct is forbidden to the elect or whether, if it was once forbidden, the ban has since been removed, either directly or by implication, be legislative action.
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Like +0 Object -1 Fan 17 Mar 18, 09:44
You are a stud! Which law firm do you work for?
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