In Kenya access to justice is via litigation and alternative dispute resolution methods like mediation and arbitration. The main costs therefore when commencing any dispute resolution claims is fees. In the case of litigation, court filing fees and arbitration or mediation fees if parties opt for the alternative dispute resolution route.
In addition, parties are required to pay their lawyers legal fees. The Advocates Act provides a lawyer and his client the freedom to charge an agreed amount as legal fees. For most lawyers, legal fees form their main source of income and it therefore does not come cheap.
There are several ways through which litigants fund their costs. Some opt for self-funding where they use their own resources to fund the process. Alternatively, litigants borrow money from friends to financing their cases. If that is not appealing stil, they can sell off assets. This too can It can be likened to self-funding. There are also Non-profit making entities who finance litigation through a method known as legal aid. Legal aid entities provide the litigants with free legal services or appoint for litigants lawyers from a pre-approved list. Litigants therefore access legal services at no cost. However, their choice is limited as the legal aid provider will choose for them the lawyer.
In today’s article I want to introduce two alternative sources of litigation funding. One is crowd funding and the other is third party litigation funding. Crowd funding happens when several people come together and raise the amount required for litigation. This is especially if the litigant is raising funds for a specialist cause like climatic change. There are several crowd funding site available other than social media.
A new concept that is increasingly growing, is using third party litigation funding. These are individuals or entities that finance the costs of litigation or arbitration, recovering their initial investment from the settlement proceeds.
Such financiers invest with the hope of not only recovering their initial investment, but also hope to make a profit by charging a percentage of settlement. It is different from legal aid in that it is done commercially while legal aid is mostly not for profit.
Some companies that provide third party litigation funding include Law Cast, Legalist and Lake Whillans. According to the founder of Legalist at least 80 per cent of the cases they have financed have had a positive outcome. From my research, companies engaged in third party litigation funding enjoy very high return on investment. However, it is is also a risky venture as litigation takes a long time to conclude, there are changes in law that may affect the outcome and it is also unpredictable in nature. A lot of cases are decided based on judicial discretion which allow a judge to exercise his or her own discretion in making a ruling.
Litigation funding ought to be done professionally. In an article by Lake Whillans, a professional valuation model for litigation has been posted. Therefore it is good to engage a financial analyst when investing into litigation. An independent lawyer is also a must have when funding. The lawyer will assist in due diligence of the claim, that is, assessing its chances of success based on past cases.
Litigation funding helps a company free up cash it would have spent on a case for operations. It also helps litigants’ access justice and share the risk of litigation with the financier. I hope that more third party litigation funding entities enter the Kenyan market as the demand is high.
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