A lot of people when researching litigation funding come across terms like maintenance and champerty. These terms were originally used as ways to monitor and protect legal cases but their practice in a modern world where litigation funding has become the norm has shifted their focus. So what do they mean? And how do they work in relation to modern practices?
A Historical Understanding of Maintenance and Champerty
For this article, we will only be looking at maintenance and champerty as they relate to Common Law and the realm of litigation funding. Historically, English law did not recognise or allow third parties to fund litigation. Given the history and practices at the time this understanding was put in place to protect the process of justice and prevent third parties from influencing lawsuits.
However, with modern laws and more transparent processes the door has been opened for litigation funding to help employees, non-profits, companies, and other parties pursue justice with the backing of an investor who is invested in your case.
English law first allowed for these changes with The Criminal Law Act 1967. This law redefined how maintenance and champerty were viewed, removing them as crimes or torts. Further changes were made in the 90s, first with the Courts and Legal Services Act 1990. This legislation was amended in the Access to Justice Act 1999 and the Legal Aid and Sentencing and Punishment of Offenders Act 2012 to permit agreements whereby a person offering litigation services provides that their fees and expenses are payable provided they comply with prescribed regulations found in Section 58 of the CLSA.
Following this, legislation was introduced to allow for Damages-Based Agreements (DBAs). These DBAs were added to allow for agreements between a litigation services provider and a client that provides for a payment to the service provider if the client obtains ‘a specified financial benefit’. This language is often interpreted to allow the person or persons providing management, litigation, or advocacy services a share of the damages paid out to the client. The Damages-Based Agreement Regulations 2013 is the latest legislation to define what can and can’t be done.
The nuance of these regulations is much more helpful than historical understandings as it allows people who don’t have access to regular legal funding the opportunity to find someone who believes in their case and who is willing to support their claim. Whether using Conditional Fee Agreements (CFAs) or Damages-Based Agreement (DFAs) there is a defined scope with modern authorities testing the validity of an agreement on several factors including;
- The extent to which the funder controls the proceedings
- The communication between the funded party and the solicitor
- The extent to which the funded party is informed about the agreement and decision making regarding the case
- The profit the funder stands to make
- Whether the funder is regulated or not
- Whether there is a risk of inflaming damages or distorting evidence
Along with oversight by authorities the litigation funding industry also exercises its oversight to ensure that all funding activity adheres to a strict code of conduct. A voluntary Code of Conduct for Litigation Funders was laid out by the Civil Justice Society in November 2011. The CJS is a government agency that is part of the Ministry of Justice. In this Code of Conduct, firms adhere to the practices and behaviour required to ensure trust and fairness are maintained throughout the legal process.
This code includes topics such as the limiting circumstances in which funders may withdraw from a case and what roles funders, litigants, and lawyers play throughout a case. Members of this Code of Conduct are part of the Association of Litigation Funders (ALF). While voluntary, most long-standing, reputable and professional third-party funders have joined the ALF. This united front from industry such as ourselves ensures that everyone using third party litigation uses a service that regulates and protects all parties involved. At Therium, we are proud to be a founding member of the Association of Litigation Funders of England and Wales and look forward to ensuring transparency and fairness are part of everything we do.
Therium Litigation Funding
As a leading global provider of litigation finance and arbitration funding, we have funded claims with a total value exceeding $36 billion including many of the largest and most high profile funded cases.
We provide litigation finance in all forms including single case litigation and arbitration funding, funding law firms and portfolios of litigation and arbitration claims. Our experience and expertise are respected in our field. Contact us now to find out more about litigation funding or would like to begin working with us.