Litigation funding enables those who do not have the financial means to pay for civil court cases to be funded by a third party; in return, the funder usually takes a percentage of any damages awarded to the claimant by the court.
History of litigation funding
The financing of litigation began in the 1990s in Australia, after insolvency legislation was enacted. It allowed insolvency practitioners to sign contracts to finance litigation, recognising legal claims as corporate assets. Before this, it had been prohibited for third parties to fund the litigation of someone unconnected to them under English common law and the doctrines of maintenance and champerty. Maintenance relates to people funding a case who are not party to it, and champerty is using maintenance for profit. Both were used to try to prevent legal proceedings from being subject to outside interference.
Following the Australian insolvency legislation, companies offering litigation funding emerged, providing claimants with the opportunity to enter into a civil action they wouldn’t normally be able to afford.
In the UK, it emerged as a serious form of funding in the 1990s. This followed changes to the Criminal Law Act of 1967 to decriminalise champerty and maintenance and the introduction of the Courts and Legal Services Act, which allowed for lawyers and clients to use conditional or no win, no fee agreements.
Access to funding
Widespread use of litigation funding came in the late 1990s after the Access to Justice Act, which was introduced to offer alternatives to traditional litigation funding. Today, it is much easier for claimants to arrange litigation funding through companies such as //www.novo-modo.co.uk/litigation-funding.
The Access to Justice Act stopped legal aid being used in personal injury cases, as claimants could use conditional fee arrangements. It also allowed successful litigants to pass any fees on to the losing party and introduced after-the-event insurance, which allowed litigants to insure against losing a case.
Over the last 30 years, litigation funding has been used across the world and is now seen as a vital way to provide access to justice.
