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India: Third Party Funding of Litigation – Tomorrow Sales Agency Private Limited v. SBS Holdings, Inc. and Ors. 2023 DHC 3830-DBIndia: – Delhi High Court Judgement

“Third-party funding is essential to ensure access to justice. In absence of third-party funding, a person having a valid claim would be unable to pursue the same for recovery of amounts that may be legitimately due. In many cases, the claimants become impecunious on account of the very cause for which they seek redressal. The cost for pursuing claims in arbitration are significant; the same not only include fees paid to arbitrators and institution, but also professional fees for legal counsels and experts and other attendant expenses. A person without the necessary means would have no recourse, in the absence of third party funders. Third party funders play a vital role in ensuring access to justice.”

“It is essential for the third-party funders to be fully aware of their exposure. They cannot be mulcted with liability, which they have neither undertaken nor are aware of. Any uncertainty in this regard, would dissuade third party funders to fund litigation”

“Having stated the above, it is also necessary to ensure that there is transparency and that the party funding is not exploitative. The fact that a party is funded by a third party is a relevant fact in considering whether an order for securing the other party needs to be made. However, permitting enforcement of an arbitral award against a non-party which has not accepted any such risk, is neither desirable nor permissible. Whilst, there is no cavil that certain rules are required to be formulated for transparency and disclosure in respect of funding arrangements in arbitration proceedings, it would be counterproductive to introduce an element of uncertainty by mulcting third party funders with a liability which they have not agreed to bear.”

Copy of the judgement can be accessed here