India - Country Report - Handbook on Third-Party Funding in International Arbitration- Second Edition

Third-Party Funding (‘TPF’) refers to the practice of financing a dispute (litigation or arbitration) by an external party, having no direct interest in the outcome of the case. Funders typically provide financial support to the parties or their lawyers in exchange for a portion of the settlement or damages awarded in the case.

In India, TPF is still a relatively new concept and is not as developed as in some other countries. However, it is slowly gaining acceptance and the last few years have witnessed the emergence of cases wherein Indian parties have engaged in TPF to resolve their disputes within and outside the country.

The limited sample size of the active cases show that the market is primarily focused on commercial litigation and arbitration, with a few funders also considering investment in insolvency cases.

1.2. Is it dominated by local or international Funders? Are there any funding brokers active in India?

As the TPF market in India is still developing, there is no clear dominance of either local or international funders. That being said, LegalPay is currently one of the few active funding entities in India. However, there are currently no active funding brokers in India.

1.3. What types of funding exist in India? Which cases typically get funded?

As explained in response to 1.1, while the TPF market is not actively regulated in India, the formative trends of TPF may be of some assistance. The TPF Agreements can broadly be classified into two categories i.e., litigation funding and arbitration funding. While litigation funding is not alien to the Indian legal market, formal agreements built on risk-reward share are yet to evolve in India.

Additionally, there are two forms of litigation financing that is relatively prevalent in India, i.e., interim finance and litigation finance. Interim finance is a short-term loan given to an entity