Editorial 1: Reimagining access to justice

Context

In a nation where ‘justice for all’ has long been a constitutional dream, Third-Party Litigation Funding might help turn it into reality.

Introduction

In the heart of India’s legal system, from the Supreme Court in Delhi to modest district courts in rural Bihar, a quiet revolution has been in the making for decades. This revolution is not about abrogating colonial laws, drafting new laws, or ensuring speedier verdicts. Instead, it centres on the question — who foots the bill for justice? In this context, the idea of Third-Party Litigation Funding (TPLF) has quickly emerged as a game-changer, potentially opening courtroom doors for many who felt they had been shut out.

What are the real-life struggles?

A small shopkeeper from Pune’s markets, waging a lonely battle against a deep-pocketed e-commerce behemoth, or tribal villagers from Odisha challenging a polluting industrial giant — these are not just David and Goliath tales but real-life legal struggles that often end before they begin, not because of weak cases, but empty wallets.

What is the idea behind TPLF?

• The idea behind TPLF is to rope investors in that would bankroll such legal battles in exchange for a cut of the winnings.
• The need for such an idea in India is painfully clear, given the massive pendency and skyrocketing litigation expenses.
• Unfortunately, we have reached a stage where justice is increasingly becoming a luxury only a few can afford.

 

‘Potential equaliser’

• The Supreme Court in a landmark judgment: Bar Council of India v. A.K. Balaji cautiously gave a green signal to TPLF.
  • It has viewed it as ‘a potential equaliser in the courtroom’ and categorically holding that TPLF was not off-limits as long as lawyers were not the ones bankrolling such cases.
  • This stance is built on solid historical foundations from the 1876 Privy Council judgment Ram Coomar Coondoo v. Chunder Canto Mookerjee, which held that old English laws on champerty against such funding would not apply to India.

What are the potential ripple effects of TPLF?

• Broader reach:  at every corner of India. In fact, we may witness situations
  • with consumer groups in Mumbai possibly banding together against food adulterators,
  • Bengaluru’s tech startups withstanding pressure against industry giants,
  • tribes supported by NGOs taking on mining mafias without fear of financial ruin, and
  • workers in textile mills facing unfair treatment being able to seek justice.
  • In specialised fields such as medical malpractice or IPR, which heavily depend on expert testimonies, TPLF could honestly turn out to be the difference between a case being heard or silenced.
  • TPLF might breathe new air into Public Interest Litigation, a powerful tool for social change since the 1980s.

What are the concerns and why is there the need for regulation?

• Any novel concept cannot evolve without thorough analysis and criticism.
  • funders will cherry-pick only the most profitable cases, leaving socially crucial but less lucrative claims in the dust.
  • how much say a funder should ordinarily be granted in matters of case strategy.
• Need for careful regulation: States such as Maharashtra, Madhya Pradesh, Orissa, and Gujarat have dipped their toes by amending their civil procedure codes to accord recognition to ‘third-party financier of litigation’
• Need for framework: India still lacks a comprehensive national framework for TPLF.
  • Such a regulatory framework is needed to ensure funders are both financially sound and ethically upright, to mandate transparency in funding deals, to protect clients’ decision-making rights, and to cap funders’ profits reasonably.

What are the broader implications of TPLF?

• A more accessible legal system should also bring about
  • stronger consumer safeguards in a country plagued by fake products,
  • better environmental protection in rapidly-industrialising regions, and
  • more accountable institutions across the board.
• High Pendancy: With over ±80,000 cases pending at the top court and ±40 million pending cases across the nation, TPLF does offer more than a ray of hope.
• Scope of TPLF: In a nation where ‘justice for all’ has long been a constitutional dream, TPLF might help turn it into reality — one funded lawsuit at a time.

What are the considerations for structuring a regulatory framework?

As we turn to the question of structuring a regulatory framework governing TPLF, several significant issues crop up.

• Licensing to be done or not: One crucial consideration is whether litigation funders should be licensed as financial service providers.
  • Its suitability pertaining to India requires careful assessment.
• Establishing a dedicated oversight body: to monitor funders and regulate such funding is a topic that requires thoughtful deliberation and discussion.
• Capital adequacy: is another critical concern in TPLF regulation.
  •  For instance, Hong Kong’s Code of Practice for Third Party Funding in Arbitration 2019 mandates disclosure of financing details, information on adverse costs, liability for costs, and the extent of funder control.
• Addressing the costs concerns: India must evaluate if its mechanism of ordering security for costs addresses similar risks in the broader litigation context.

Way Forward

Determining the appropriate level of court involvement and the extent of court approval in TPLF arrangements is a complex question that requires resolution. Identifying the right degree of court intervention and recognising specific arrangements that necessitate such oversight will become foundational pillars in shaping a well-defined regulatory framework. This must reconcile access to justice with preserving judicial integrity.

Conclusion

As India takes active steps toward reimagining justice, TPLF presents both a challenge and an opportunity. By developing targeted and comprehensive regulations tailored to India’s unique legal landscape, the country can foster a thriving ecosystem while safeguarding all parties’ interests. In doing so, India might set a new global standard, balancing financial innovation with the fundamental right to justice. India can redefine justice, blending innovation with equity and access.

Editorial 2: Spotlighting the work of the Economics Nobel winners

Context

AJR have emphasised the role of institutions in development but there has been criticism of this approach as privileging western liberal institutions.

Introduction

The Great Divergence is a term used to describe the gap in economic and political development between the west and the east. It emerges from this idea that in the 17th and the 18th centuries, the advantages that western Europe enjoyed due to industrialisation allowed them to project political power elsewhere. This in turn helped them to reap economic rewards. One of the most relevant findings that emerged from this scholarship is the idea that institutions established during colonialism can have persistent effects many years after countries transitioned to sovereign rule. 

Institutions and development

• The winners of this year’s Economics Nobel: or the Sveriges Riksbank Prize awarded for economic sciences, Daron Acemoglu, Simon Johnson and James Robinson (AJR), pioneers in new institutional economics, emphasised the role of institutions in the direction of development
• Concept of the institutions:  Institutions are constraints on human behaviour, the rules of the game in the form of law and order that prevent the state or any other party from the coercive use of force on those who cannot defend themselves.
  • This can take the shape of the constitutional limits on the powers of an executive.
  • Institutions exert their effect through incentives, such as the traffic fines on a busy street that nudges a driver from breaking the speed limit. 

What are the Extractive vs. Inclusive Institutions?

• AJR’s work has highlighted the role of extractive institutions in shaping a country’s growth trajectory.
• Extractive institutions are common in history because they still offer the possibility of generating prosperity but distribute the fruits of growth to a small group of elites.
• Inclusive institutions, on the other hand, have rules and incentives that motivate people.
• Colonialism established extractive institutions in Sub-Saharan Africa, Latin America, the Caribbean, and South Asia while there are relatively fewer extractive institutions in the United States, Canada, Australia and New Zealand.

What is the causal impact on economic growth?

• AJR’s seminal work: was in establishing how these institutions have a causal impact on economic growth.
• Assembling of archival evidence: to show differences in settler mortality rates in tropical and temperate countries.
• Exemplification: Settler colonists of Australia and the U.S. settled there in large numbers due to a relatively disease-free environment while colonists who settled in more tropical countries were wiped due to disease. 

What is the Research Methodology?

• The key to this type of research was the natural experiment.
• Social scientists usually cannot manipulate the variables they study like natural scientists running a clinical trial.
• What they can do is create research design innovations that approximate true experiments.
• They find observational settings in which causes are randomly assigned among units that they can compare such as individuals, villages, cities or countries.
• A simple comparison across these units exposed to the presence or absence of a cause can provide evidence for the effects that that particular cause has. 

Investigations in India

• Contribution by AJR: is in inspiring several studies that looked at the long-term effects of historical events on economic development where they identified new variables from detailed historical data.
  • Two of the most well-known studies in this genre come from the Indian subcontinent. 
• Notable studies: Abhijit Banerjee and Lakshmi Iyer (2005) found that landlord-based colonial land tenure systems resulted in lower agricultural investments and productivity in those areas years later.
  • Lakshmi Iyer (2010) showed that areas under direct colonial rule had fewer schools, health centres and roads than those under indirect colonial rule — an effect that seems to be fading away only recently. 
• Economic institutions and political power: are collective choices determined by political power. Political power can be de jure or de facto.
  • The political power for Joe Biden does not come from the person but the office that he holds, the President of the United States of America.
  • On the other hand, you cannot say the same for Teodoro Obiang Nguema, the President of Equatorial Guinea, one of the world’s longest serving leaders. This would be de factor power. 
• Reforming extractive institutions: The question of reform of an extractive institution is about the ability to solve a collective action problem through the economic resources available to them.
  • What AJR’s research has shown is that it is difficult for groups with conflicting interests to agree on what good institutions look like.
  • Groups with political power will always have an incentive to use that power to change the distribution of resources in their favour. 

A perspective

• Timeline of the research arrival: AJR’s research came into prominence at a time when the economics profession was moving away from a presumptive policy framework to something more diagnostic.
  • There was a deliberate move away from universal remedies such as the erstwhile shock therapy in Latin America or the Washington Consensus.
• Criticism of the research: Acemoglu and Robinson have been sceptical about China’s spectacular growth that is expected to slow down due to the eventual spread of extractive institutions. 

Conclusion

However, scholars such as Yuen Yuen Ang have argued that AJR’s approach tends to privilege western liberal institutions. When the U.S. was a developing country, they were as corrupt or engaged in risky practices quite similar to those undertaken in China today. The narrative of the import of inclusive institutions from western Europe is at odds with America’s chequered history with slavery, exclusion of women from property rights, and genocide of Native Americans. Other scholars such as Onur Ulas Ince (2022) have also pointed out the reluctance of AJR to critically engage with the complexity of actually existing colonialism and capitalism.