The Why

Justice systems have been struggling with the concept of fairness from the time these systems were created.  As justice systems have evolved, the level of jurisprudence has increased, laws have become more complex, litigation and lawyers have become more specialized, and the amount of information available for disputes has increased exponentially.  These factors all result in a significantly more expensive judicial process and a reduction in a plaintiff’s ability to affordably access an appropriate defense.  We now live in a world where the cost of litigation has been increasing at a rate of nearly 9% per year¹ for the past few decades. Accordingly, the issue of affordable access to justice has become one of the most significant challenge facing the legal system. While contingent fee arrangements were the first step taken by many legal systems to address the cost issue, those efforts proved inadequate, hence the recent acceptance of litigation finance as a tool to access justice in an equitable way.

Litigation finance started in the area of insolvency, where the court correctly recognized that the actions of one party ultimately led to the insolvency of another party. To not allow a plaintiff with limited resources to arrange third party financing to pursue damages would be an affront to any civil justice system that is grounded in providing a fair and equitable forum for settling disputes.  The trend over the course of the last two decades has been to support the use of litigation finance with more and more judiciaries setting aside old common law doctrines of champerty and maintenance in order to facilitate affordable access.

Today, most justice systems are supportive of litigation finance, as long as its existence and terms do not impair the plaintiff’s ability to make their own decision regarding the outcome of their case.  The following graphic illustrates the evolution of litigation finance in three of the largest and most mature markets for litigation finance in the world.