What is Third-Party Litigation Funding (TPLF)?

Table of Contents☰

About Third-Party Litigation Funding (TPLF):

TPLF, often referred to as litigation finance, is a financial arrangement in which a third party (with no prior connection to the litigation) in a legal dispute provides funding to support the plaintiff’s pursuit of a legal claim.
In return, the third-party funder receives a portion of the proceeds if the case is successful.
Plaintiffs do not have to repay the funding if their lawsuit is not successful.
This funding model allows entities to bring lawsuits without shouldering the financial risks associated with litigation.
The emergence of TPLF has been driven by various factors, including the escalating costs of legal proceedings, the complexity of modern litigation, and the desire to level the playing field between parties with disparate financial resources.
Disputes that attract TPLF generally include commercial contracts, international commercial arbitration, class action suits, tortious claims like medical malpractice and personal injury claims, anti-trust proceedings, insolvency proceedings, and other like claims that have a calculated chance of resulting in a substantial monetary award.
TPF is not expressly prohibited in India. In fact, several judgments highlight its benefits and express that there is a need for its regulation.

Q1: What are tortious claims?

A tort is a civil claim where a claimant has suffered damages due to the actions of the person who committed the act. In this type of claim, the person who committed the act can be held legally liable. The losses incurred by the claimant may be financial, physical injuries, emotional distress, invasion of privacy, and others. Basically, a tort claim is an act committed by one person that causes harm to another.

Source: Reimagining access to justice