THIRD-PARTY LITIGATION FUNDING: A COMPARATIVE LEGAL ANALYSIS OF THIRD-PARTY LITIGATION FUNDING AND ITS POTENTIAL IN INDIA

Abstract

Third party litigation funding (TPLF) enables financial assistance to a claimant, for the purposes of litigation, by an unrelated third party to the suit. Commercial funding is the most popular form of TPLF. In cases of commercial funding, the litigation funder expects a certain percentage of profit or a success fee upon the conclusion of the litigation. There is no specific law governing TPLF in India. However, reading the judicial precedents along with certain legal provisions, it can be inferred that the practice of TPLF is not prohibited under Indian law. This paper studies the development of the concept of TPLF, and the potential for its practice in India, with a special focus on shareholder class action suits.  Through a comparative analysis, the paper argues  that TPLF can be especially promising in shareholder class action suits. Drawing on the experiences of other jurisdictions, the paper provides certain recommendations that could guide the policy regulating the practice of TPLF in India. The paper finally argues that maximum advantage of this practice can be derived if a relationship of trust is created between the third party funders and the claimants.