When a legitimate claim worth millions sinks unfunded because the claimant lacks resources to pursue arbitration, is justice truly served? Third-party funding (“TPF”) sits at the intersection of access to justice, market innovation, and procedural integrity, enabling impecunious but meritorious claimants to pursue their claims. Historically, TPF conflicted with doctrines of champerty and maintenance, rooted in preventing abuse of justice. Modern arbitration increasingly rejects these qualms, balancing access with safeguards against conflicts, confidentiality breaches, costs asymmetry, and funder control.
In the context of civil suits, third-party funding is acknowledged in certain States, such as Madhya Pradesh and Orissa, and is reflected in the Civil Procedure Code, 1908, Order 25 Rule 1 (as amended by these States), which provides that the Courts have the power to secure costs for litigation by asking the funded party to deposit the costs in Court.
The Indian judiciary has cautiously embraced TPF through two landmark judgments.
The AK Balaji breakthrough
In Bar Council of India v. A.K. Balaji the Supreme Court, relying on Rule 21 of the Bar Council of India Rules, affirmed that advocates cannot engage in practices akin to champerty or maintenance, meaning, they cannot buy or traffic in an actionable claim, nor stipulate or agree to receive any share or interest in such a claim. Simultaneously, the Court clarified that there is no corresponding bar on third parties (non-lawyers) funding the litigation and being repaid from the proceeds, thereby creating doctrinal space for professional funders and other non-lawyer entities to finance claims. In doing so, the Court essentially signalled that champerty and maintenance no longer operate as absolute prohibitions for non-lawyers in India.
Tomorrow Sales Agency: Progressive call for reform
The Delhi High Court's Division Bench in Tomorrow Sales Agency (P) Ltd. v. SBS Holdings Inc., provided the most comprehensive engagement with TPF in Indian jurisprudence. The case involved a non-banking financial institution that had funded an arbitration, raising the question whether it could be made liable for an adverse costs award against the funded party.
The Court recognized TPF as an access-to-justice tool, stressing that without such funding mechanisms, “a person having a valid claim would be unable to pursue the same for recovery of amounts legitimately due” and that third-party funders “play a vital role in ensuring access to justice.” At the same time, it insisted on the need for “transparency” and on ensuring that “the party funding is not exploitative” and held that the existence of funding is a “relevant fact” when considering security for costs.
However, it drew a firm line against automatically imposing costs liability on the funder: it held that permitting enforcement of an arbitral award against a non‑party who has “not accepted any such risk” is neither desirable nor permissible. While acknowledging that “certain rules are required to be formulated for transparency and disclosure” in funding arrangements, the Court cautioned that it would be “counterproductive” to introduce uncertainty by “mulcting third party funders with a liability which they have not agreed to bear.”
United Kingdom
In England, where champerty and maintenance have been effectively abolished, English courts have established key TPF principles. In Arkin v. Borchard Lines Ltd., the Court of Appeal articulated the now‑famous “Arkin cap”, which limited professional funders’ adverse costs liability to their funding amount. In Excalibur Ventures LLC v. Texas Keystone Inc., the funders were held jointly and severally liable to pay the successful party’s costs on an indemnity basis, albeit subject to the Arkin Cap. In Essar Oilfields Services Ltd v. Norscot Rig Management Pvt. Ltd., the English court confirmed that funding costs qualify as recoverable “other costs”. This framework ensures funders bear proportionate downside risk without deterring legitimate funding.
More recently, in R (on the application of PACCAR Inc) v. Competition Appeal Tribunal, the UK Supreme Court held that third‑party litigation funding agreements entitling funders to a share of damages constitute “damages‑based agreements” (“DBA”) under section 58AA(3) of the Courts and Legal Services Act 1990, subjecting them to the DBA regulatory regimes as “claims management services”; with non-compliant Litigation Funding Agreements risking their unenforceability.
Complementing this judicial supervision, the Association of Litigation Funders of England and Wales’ Code of Conduct (2018) imposes market self-regulation, requiring adequate capital, avoidance of litigation control, good faith conduct, confidentiality protection, and acceptance of adverse costs exposure per agreed terms and judicial principles.
Singapore
Singapore adopted a statutory route through amendments to the Civil Law Act in 2017, specifically through the insertion of Sections 5A and 5B, expressly recognising TPF while abolishing the common‑law champerty and maintenance doctrines for qualifying proceedings. Only entities principally engaged in dispute funding with a minimum SGD 5 million paid-up capital may act as funders. The framework expanded via Civil Law (Third-Party Funding) (Amendment) Regulations, 2021, to cover domestic arbitration proceedings, court proceedings arising from or connected with domestic arbitration, proceedings in Singapore International Commercial Court (SICC), appeals arising from SICC proceedings and related mediation proceedings. Moreover, Singapore's Legal Profession (Professional Conduct) Rules, 2015 mandate lawyer disclosure of TPF arrangements, funder identity and contact details to tribunals and other parties.
Leading international arbitration institutions have assumed regulatory responsibility in some instances. SIAC Arbitration Rules 2025, through Rule 38, impose mandatory disclosure of TPF agreements and funder identity, prohibit post-tribunal constitution funding arrangements creating arbitrator conflicts, and grant tribunals sanctioning authority for non-compliance. HKIAC's Administered Arbitration Rules 2024, through Articles 44 and 45, require TPF disclosure and address confidentiality, while ICC Arbitration Rules, 2021, through Article 11(7) mandated disclosure of TPF agreements and funder identities. This reflects an emerging pattern of institutional regulation.
Considering the emergence of institution rules and soft laws like the IBA Guidelines and SIAC practice notes, the 2017 Saikrishna High Level Committee Report identified a critical regulatory gap in TPF regulation and recommended that the inclusion of a regulatory framework could potentially give a boost to arbitration in India. This matters because unregulated TPF potentially culminate in certain risks like arbitrator conflicts from absent disclosure requirements, confidentiality breaches as funders demand case-critical information, unrecoverable adverse costs against impecunious claimants, and funder overreach in settlements and strategy. India could adopt a legislative reform and the Indian institutions like DIAC and MCIA could adopt SIAC/HKIAC-style rules. These could transform regulatory silence into sophisticated supervision, positioning India as a credible international arbitration hub while safeguarding access to justice and procedural fairness.
About the authors: Aditya Ganju is a Partner and Vatsal Agrawal is an Associate at AG Chambers.
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