Money Meets the Law: How Litigation Funding is Reshaping Justice

Imagine a world where justice is not determined by the ability to pay. Third-party litigation funding is making this a reality, breaking financial barriers and transforming the legal landscape. With litigation costs in India soaring to 31% of the claim value, many rightful claims are abandoned simply because pursuing them is too expensive. TPLF bridges this gap by providing financial backing, enabling individuals and businesses to fight their legal battles without the fear of crippling costs. Litigation funding is a calculated investment, backed by rigorous analysis of legal merits, risks and probabilities of success. Initially focused on individual-case investments, TPLF has evolved into portfolio funding, gaining traction across diverse legal domains such as insolvency, arbitration and even personal injury claims.

Investing in legal success

Litigation funding enables a claimant to obtain financial support from a funder who evaluates commercial disputes as investment opportunities. The claimant discloses case details, and the funder conducts due diligence to assess the merits, risks, potential recoveries and likelihood of success. If the claim meets the funder’s criteria, financing is provided — typically on a non-recourse basis — covering litigation expenses, with repayment contingent upon a favourable outcome. Funding may be secured at any stage of the proceedings, including appeals and enforcement.

A litigation funding agreement generally includes provisions on definitions, funding obligations, claimant warranties, confidentiality, indemnities and conflict management. It further sets out claim particulars, funding amounts, cost allocations, conditions precedent and disclosure requirements. This mechanism facilitates access to justice while mitigating financial exposure for claimants.

Expanding horizons

The global litigation funding market is experiencing rapid expansion, driven by proactive measures in countries like Germany, Hong Kong and Singapore. Valued at $10.9 billion in 2018, the market is projected double to $22.4 billion by 2027, growing at a compound annual growth rate (CAGR) of 8.3%. Additionally, the litigation funding investment market is expected to surge from $17.5 billion in 2025 to $67.2 billion by 2037, reflecting a CAGR of 11.1%.

In the UK, litigation funders have supported over 600 claims, with 388 successfully resolved, underscoring the industry’s growing influence. Global leaders such as Apex Litigation Finance, Burford Capital and Omni Bridgeway dominate the sector, while Indian players like LegalPay, LitiCap and Legal Fund are carving their niche in this expanding landscape.

Litigation funding in India: Unlocking new avenues for justice and investment

TPLF is gaining ground in India, backed by the Civil Procedure Code, 1908¹ (CPC). States like Maharashtra and Madhya Pradesh have explicitly permitted it through amendments to Order 25 Rules 1² and 3³ CPC, with no statutory prohibition under Indian law. TPLF agreements are structured as legal finance contracts governed by the Contract Act, 1872⁴. In BCI v. A.K. Balaji⁵, the Supreme Court clarified that while advocates cannot enter contingency fee arrangements, third-party funding by non-lawyers is not prohibited — reinforcing TPLF’s potential if regulated effectively.

Expanding horizons: Arbitration and litigation funding

Litigation funding is increasingly being explored in arbitration, where the potential for return on investment is substantial. Arbitration, often the preferred route for resolving high-stakes commercial disputes, presents a lucrative opportunity for funders due to the significant monetary claims involved and the relative predictability of outcomes compared to traditional litigation. Funders assess arbitration cases based on their legal merits, the likelihood of success, enforceability of awards and the financial standing of the opposing party.

Notably, two major instances, the arbitration award monetisation cases of Hindustan Construction Co. Ltd. v. Union of India⁶ and Patel Engg. Ltd. v. North Eastern Electric Power Corpn. Ltd.⁷ have sparked interest in litigation funding as a viable corporate financing tool. These cases have prompted financial and legal experts to view TPLF as an alternative funding mechanism for businesses entangled in complex legal disputes.

Untapped potential under the Insolvency and Bankruptcy Code, 2016 (IBC)

Another promising avenue for litigation funding in India lies within the Insolvency and Bankruptcy Code, 2016⁸ (IBC). When companies undergo insolvency proceedings, creditors scramble to recover whatever value remains. However, substantial potential recoveries often remain locked in disputed claims, avoidance transactions, or legal uncertainties, which are frequently left unpursued due to financial and procedural constraints.

TPLF is beginning to reshape the insolvency landscape by enabling resolution professionals (RPs) to pursue high-cost avoidance actions and disputed claims without diverting essential resources from the corporate insolvency resolution process (CIRP). With funding support, insolvency professionals can focus on core responsibilities such as managing the corporate debtor as a going concern, inviting claims, conducting meetings of the Committee of Creditors (CoC) and overseeing the resolution process, while funders bear the financial burden of legal proceedings. Further, even interim financing is also being resorted to by various litigation funding teams.

A landmark development in this space was India’s first successful TPLF exit under the IBC in the resolution of Yashomati Hospitals (P) Ltd.⁹, In this case, the resolution professional secured funding from LegalPay to keep the company operational during insolvency proceedings. Within nine months, LegalPay exited the investment with over 26% returns, marking a significant milestone in the evolution of litigation funding in India.

The road ahead

As litigation funding gains traction in India, its growing underscores its viability as both a financial tool and a mechanism for legal empowerment. However, despite its advantages, the absence of a clear regulatory framework remains a key hurdle. Unlike jurisdictions such as the UK, which has a code of conduct for litigation funders, India lacks structured guidelines to govern third-party funding. Establishing a regulatory framework would not only provide clarity but also instil investor’s confidence, ensuring ethical funding practices and preventing misuse. Additionally, tax considerations, investor participation and greater awareness will be crucial in shaping a robust litigation finance ecosystem.

If implemented with the right safeguards, litigation funding can serve as a transformative force, ensuring that justice is not dictated by financial means. By embracing global best practices and adapting them to India’s legal landscape, the country can unlock the full potential of TPLF — creating a balanced, transparent and accessible system where financial limitations no longer stand in the way of rightful claims.