Australia, the UK and the US have long embraced Third Party Funding (“TPF”) as a means for access to justice and financial risk mitigation. Also, TPF is viewed by investors as an “exciting” asset class through which, one can achieve enhanced investment diversification and healthy returns. Unlike other jurisdictions, India is yet to witness and benefit from the proliferation of TPF. Nevertheless, there is still uncertainty looming over the global markets; aside from industries such as hospitality and air travel. Some other sectors like infrastructure, construction and energy have been hit hard and affected in ways that almost no one could have predicted due to COVID-19. The socio-economic impact of the pandemic is expected to affect many Indian companies that hold high-value litigation and/or arbitration claims to resort to capital infusing strategies such as TPF. This, along with the introduction of a regulatory framework that many have been calling for – may soon see TPF playing a pivotal role in dispute resolution.

TPF: a Staple in Dispute Resolution?

TPF is a relatively “exotic” (until a few years ago) practice to parties involved in all sorts of disputes. It has evolved and become a well-established way of pursuing claims off-balance sheet for corporate entities. It is also an important tool promoting access to justice for individuals and cash-strapped or insolvent/bankrupt entities alike. Albeit not an act of altruism, given that funders are repaid based upon invested capital or a percentage of case proceeds, the socio-economic benefits of TPF are evident enough to encourage acknowledgement from even its most outspoken critics.

This type of funding is typically a non-recourse mechanism, meaning that if a case fails, all a funder can do is lick their wounds and walk away. There is in effect, no remedy that lies against the debtor’s personal assets for the repayment. In other words, a funded party can pursue litigation or some form of ADR such as arbitration at no risk. TPF is capable of levelling the playing field, especially in “David versus Goliath” situations where an opponent may be better resourced, sophisticated, potentially a repeat player in dispute resolution matters and, therefore, more risk tolerant. In the same regard, disclosure from a party that it has obtained TPF from a professional funder may dramatically change the dynamics and alter parties’ perceptions, often signalling to an opponent that a case is meritorious and that the funded party “means business”, i.e., is prepared to go the distance to attain justice. As a result, quicker settlements may be achieved due to the mere existence of TPF.

Moreover, an increasing variety of investors such as not only hedge funds, private equity firms and pension funds but also family offices, investment banks and insurers, – view TPF as an intriguing and ever-evolving asset class that can lead to further diversification and great (sometimes even oversized) returns. This evolution under TPFs may be compared with more “conventional” asset classes and the overall performance of the bond and stock markets.

Given the above, an increasing number of litigation and ADR participants (and even the general public) have lately become much more open to TPF, acquainted with its mechanics and possibilities from its use. This, in tandem with the oft-prohibitive costs to litigate in India, means that clients and lawyers alike are now more proactive about reaching out to dispute financiers, making India more likely to be in the position to embrace TPF in the not-so-distant future.

Status of TPF in India

India hasn’t accepted TPF in practise till yet, unlike Australia, the US, the UK, Singapore, Hong Kong, France, Germany, and Canada.

In recent years, however, courts and legal professionals have taken a shot at addressing and/or commenting on the status of TPF in the sub-continent, more decisively. For instance, the Supreme Court in Bar Council of India v. A.K. Balaji and others[1] held that advocates cannot fund litigation on behalf of their clients. However, it was also held that:

‘[t]here appears to be no restriction on third parties (non-lawyers) funding the litigation and getting repaid after the outcome of the litigation. In the U.S.A., lawyers are permitted to fund the entire litigation and take their fee as a percentage of the proceeds if they win the case. Third Party Litigation Funding/Legal Financing agreements are not prohibited.’

Jurisprudence on the subject emerged largely from decision rendered by the Privy Council in 1876 in which after a thorough analysis, it  was accepted that the doctrines of champerty and maintenance “[were] not of force as specific laws in India”. Although until that time Indian courts had generally been reticent to formulate concrete opinions with respect to TPF’s legality and, [2] further decisions were issued in the following decades reinforcing the view that, in most instances, contested TPF arrangements should generally be upheld as legal, enforceable and not against the public policy.

More recently, the Bombay High Court found that the “[m]ere fact that … a law graduate” who was not admitted as an Advocate under the Advocates Act, 1961 had entered a contingent agreement with a client in the context of arbitral proceedings and stated that “ It would not be sufficient to conclude that the agreement entered into by him for being entitled to remuneration based on the outcome of the arbitration proceedings would render that agreement contrary and opposed to public policy (…)[3].Nonetheless, it should be noted that contingent fee arrangements are still prohibited in the country.

The gradually increasing appetite of financiers to deploy substantial amounts of money to parties embroiled in disputes in India may be explained (at least in part) by the relatively recent modernization of the erstwhile Companies Act, 2013 and, perhaps more importantly, the implementation of the Insolvency and Bankruptcy Code, 2016. This has triggered an upsurge in cases where creditors push overleveraged entities to bankruptcy. It may be recalled that litigation funding started as a solution to scarcity of resources. Consequently, in the event of bankruptcies where litigation and claims against assets may arise, funders are typically well placed to be involved and offer value.

Furthermore, some states such as Gujarat, Madhya Pradesh, Maharashtra, Uttar Pradesh, Goa, Tamil Nadu etc, have amended Order 25 of Rule 1 or Rule 3 of the Code of Civil Procedure, 1908, as per which the Courts have the power to implead the third party funder as a party to the proceedings, in effect, directly providing security for costs borne by them.[4] TPF’s positive outlook has also been augmented in the 2017 report of the High Level Committee to review the Institutionalisation of Arbitration Mechanism in India.

In view of the above, TPF remains largely unregulated in India. Some may suggest that the lack of regulation may incentivize investors, in particular foreign funders, to “dive right in”. However, unless state regulators take initiatives to impose reasonable requirements on third-party financiers, the lack of clear regulation may persist The vast majority of – foreign-based – professional funders would welcome some certainty and guidance, for instance, on India-based operations and claim mechanisms.[5] Another issue that may cause hindrances to funders, is the explicit prohibition of contingency arrangements among advocates which, for reasons already examined by the judiciary, does not seem likely to change except through legislative intervention. Arguably, the reason for this may be that many funders prefer that the clients’ lawyers are aligned and also have some “skin in the game” rather than be paid hourly or fixed fees bearing virtually zero risk from an unsuccessful outcome in the litigation or ADR process.

TPF in Indian Infrastructure, Construction and Energy

Disputes arising from business relationships in sectors such as infrastructure, construction and energy, not seek TPF arrangements but are very well suited to it. This is because they are usually complex and highly technical, take a long time to resolve. , Additionally, considering that several such disputes are resolved through prolonged arbitration, with a number of lay and expert witnesses being summoned, they may entail inordinately high legal costs. Consequently, cost efficiency is a significant consideration to parties involved under such claims.  On the flipside, the construction industry is characterized by low-profit margins, delays and late payments.

The global TPF investment market has been valued at approximately USD 11.5 billion (approximately, INR 86.2 Crores) in 2019 (and is expected to grow up to USD 24 billion (approximately INR 179.9 Crores) by 2028. At the same time, analysts expect India to become the third largest market for construction and infrastructure by 2022. Moreover, construction disputes are rising, in line with a trend witnessed prior to the onset of COVID-19. Construction based-insolvencies have been also been on the rise – in particular reference to numerous high-profile contractors across Gulf Cooperation Council (GCC) jurisdictions. Naturally, this has been exacerbated in the past eighteen months with widespread negative effects on  Management. It is also reported that in the recent years, construction disputes have seen a threefold increase in cases. The infrastructure construction/engineering and energy field often constitute the majority of cases in arbitral institutions. For instance, disputes arising from construction/engineering and energy historically constituted the largest number of ICC cases (24% in 2020). It is also a significant sector for claims before the Singapore International Arbitration Court (SIAC), London Court of International Arbitration (LCIA) and Dubai International Arbitration Centre (DIAC).

Aside from defraying legal costs for single event litigation/arbitration, TPF is becoming ever popular in industries such as infrastructure, construction and energy on the presumption that it may convert legal departments from “CFO headaches” into profit centres through portfolio arrangements. Portfolio funding for corporates (and law firms, of course) is a win-win situation since inter alia pricing is more competitive for funded parties on account of the better risk profile for investors who benefit from the element of cross-collateralization.

The latter means that a portfolio is structured with a “cushion”, i.e., matters that are more likely to successfully serve as a buffer against those that are less likely to achieve a positive outcome. In other words, not all cases in a curated “basket” of distinct claims need to be resolved in favour of the claim holder. for a funder to receive returns on their invested capital, as well as its target profit (also known as uplift).This is in contrast with the inherently binary outcome of single-basis cases, especially as they move down the path of a trial or an arbitration hearing.  As mentioned earlier, this type of legal financing allows businesses in the aforesaid sectors to prosecute claims and make affirmative recoveries by substantially reducing or even eliminating the financial risk of doing so. Interestingly, such recoveries are achieved from assets that would have likely remained dormant (and eventually “die off”) due to the high financial risk that they entail.

In India, publicly traded infrastructure and construction majors like Hindustan Construction Company (“HCC”) and Patel Engineering (“Peng”) have already secured financing solutions for their portfolio of arbitration claims. HCC is one of the first companies in the engineering, procurement and construction (“EPC”) sector to have monetized claims by selling them to a special purpose vehicle, having struck a deal with a consortium of investors led by Black Rock. It is also reported that HCC received in return an upfront cash payment that is used to pay off and to meet its working capital needs. A year earlier (2018), PEng created a subsidiary along with an investment fund to pursue claims off balance sheet and benefit from substantial receivables. In specific, it assigned its beneficial interest in certain claims to a wholly owned subsidiary, with investment management company Eight Capital holding 51% of the equity in the latter.

The above-mentioned notion doesn’t mean that single case funding is losing its relevance. In infrastructure/construction, the number of high-value cases in Asia and the Middle East illustrates that there will always be a market for financing single cases. Covid-19 may only accentuate this observed trend.

Indeed, the pandemic has caused disruptions to a great number of projects worldwide, including in India. Especially earlier in the pandemic, many contractors were unable to fulfil their obligations leading to contract terminations and breaches. Perhaps to a lesser extent, this continues to be the case today while uncertainty on what might transpire in the next few months or even years – still casts great doubt on when a pre-Covid 19 routine will be feasible. Consequently, in absence of certainty, numerous contractors desperate for liquidity may seek to monetize their claims or pursue them at a no-risk basis.

Final Remarks

The Indian market is very likely to be ripe for litigation funding in the coming years. For the time being, funders are focusing on cases heard in international arbitral institutions outside India, such as Singapore, Hong Kong and London, but with Indian parties. SIAC  has representative offices in Mumbai and Gujarat for some time now and has witnessed a rise in disputes involving Indian contractors. However, those familiar with TPF anticipate that there will be a shift in trends once investors gain more comfort with the jurisdiction generally, which could be a function of some form of regulation being introduced.

One would expect that, since contingent fee arrangements are not permitted in India, TPF should naturally thrive in such an environment. That said, many (if not all) disputes’ funders report that they are fond of TPF arrangements where legal counsel is (to a greater or lesser extent) aligned with the investors in terms of risk. Although it is somewhat rare to come across such arrangements in arbitration. This is the area that most funders have allocated funds to so far. In any event, the fact that private equity (see HCC and PEng instances) rather than dedicated litigation/arbitration financiers have engaged in claim funding is rather telling.

EPC companies are almost a natural fit for TPF mandates, especially at a time when Covid-19’s repercussions continue across nations. As a result, several contractors with a number of disputes may find obtaining non-recourse funding to prosecute claims or commence new proceedings on a portfolio basis, an attractive proposition. One of the main features of portfolio financing, i.e., that deployed funds are secured against the entire book of cases instead of only the very strong ones, often means lower borrowing costs for the EPC company/claimholder because the risk is spread across multiple matters with the potential of even capturing a few defence cases as well.

With that said, and based on what has been publicly reported in the last three years or so, it appears that funding of corporates on a portfolio or individual case basis may pick up further steam, owing to the emergence of areas such as environmental, social and governance (“ESG”) litigation. Many businesses are now compelled to comply with ESG requirements which now form part of most investors’ modus operandi.

One thing which may stand irrefutable, is that TPF is here to stay and in all likelihood make its way to India subject to regulatory and policy-based revisions.

About the Authors

Mr. Athanasios Papadas is an Investment Manager at dispute funder Augusta Ventures Canada Limited in Toronto, Canada.

Kshitij Pandey is a 3rd year Law student at the Dr. Ram Manohar Lohiya National Law University (RMLNLU), and an Associate Editor at IJPIEL.

Editorial Team

Managing Editor- Naman Anand

Editor-in-Chief- Aakaansha Arya and Akanksha Goel

Senior Editor- Varsha S. Banta

Associate Editor – Kshitij Pandey

Junior Editor – Tisa Padhy

Preferred Method of Citation

Athanasios Papadas and Kshitij Pandey “The Prospects of Third-Party Funding in Indian Infrastructure, Construction, and Energy Disputes: An Overview” (4 November, 2021)



[1] AIR SC 1382 (2018).

[2] See e.g., Grose & Anr. v. Amirtamayi Dasi, (1869) 4 Beng LR 1.

[3] Jayaswal Ashoka Infrastructures Pvt. Ltd. v. Pansare Lawad Sallagar, (2019) 5 Mah LJ 689, SCC Online Bom 578.

[4] See e.g., Anish Wadia & Shivani Rawat, supra note 4, at 6 (n. 41).

[5] GIAN Marco Solas, Third Party Funding: Law, Economics and Policy 59 (Cambridge University Press, 2019).