Third Party Funding
(TPF) refers to an agreement or arrangement between a funding company/individual
and a client (the claimant) whereby the funder agrees to finance some or all of
the client’s legal fees in exchange for a share of the proceeds in the event of
success. Under this model, outside investors — typically a hedge fund or
special purpose litigation fund — seek out commercial litigants who have
meritorious and substantial claims, but who may be unable or unwilling to make
the financial investment required to litigate those claims.

In Nigeria, TPF is
frowned at by the courts based on the common law principles of champerty and
maintenance which: (i) prohibit a third party from funding litigation between
disputants (in which the funder has no legitimate interest); and (ii) render an
agreement to provide such funds illegal and void, on the ground of public
policy. The latin maxim, “interest
reipublicase ut sit finis litium”
(it is in the interest of the State that
there be an end to litigation) underpins public policy and permitting
litigation funders could result in significant spikes in litigation, and
potentially more of the otherwise unmeritorious claims.  Presumptively most litigation funders could
view the suits as an investment, thereby incentivizing a more than passing
interest in the outcomes of claims they funded, and all attendant implications
flowing therefrom. Being common law principles, until contrary statutory
provisions are enacted, the principles of champerty and maintenance are
applicable in Nigeria.

In Oloko
v. Ube[1]
Edozie JCA held thus: “at common law, champerty is a form of
maintenance that occurs when the person maintaining another stipulates for a
share of the proceeds of the action or suit or other contentious proceedings
where property is in dispute. An agreement by a solicitor to provide funds for
litigation in consideration of a share of the proceeds is champertous.”

More recently, in Kessington
Egbor v. Ogbebor,[2]

the Court held that where a person elects to maintain and bear the costs of
action for another in order to share the proceeds of the action of the suit,
such an action is champertous.

In R
(Factortame Limited & Ors) v. Secretary of State for Transport, Local
Government and the Regions
,[3] Lord Phillips of Worth Maltravers MR
approved the following two definitions of champerty and maintenance respectively:
‘‘a person is guilty of maintenance if he
supports litigation in which he has no legitimate concern without just cause or
excuse. Champerty occurs when the person maintaining another stipulates for a
share of the proceeds of the action or suit.’’


Rules of Professional
Conduct (RPC) 2007

The RPC, which
regulates the conduct of legal practitioners, only provides for contingency fee
and not TPF. The term “contingency fee” is defined by the RPC as: “the fee paid or agreed to be paid for the
lawyer’s legal services under an arrangement whereby compensation, contingent
in whole or in part upon the successful accomplishment or deposition of the
subject matter of the agreement, is to be of an amount which is either fixed or
is to be determined under a formula.”

Rule 50(1) & (2)

provides as follows: “(1) A lawyer may
enter into a contract with his client for a contingent fee in respect of a
civil matter undertaken or to be undertaken for a client whether contentious or
non-contentious: provided that: -a. The contract is reasonable in all the
circumstances of the case including the risk and uncertainty of the
compensation; b. The contract is not i. Vitiated by fraud, mistake or undue
influence, or ii. Contrary to public policy; and c. If the employment involved
litigation, it is reasonably obvious that there is a bona fide cause of action.
(2) A lawyer shall not enter into an arrangement to charge or collect a
contingent fee for representing a defendant to a criminal case.”

It is instructive to
note that under Rule 50(4) RPC, a lawyer shall not enter into a contingent fee
arrangement without first informing the client of the potential effects.

From the foregoing
provisions, a contingency fee arrangement is only permissible in the following
circumstances, where: (i) it is a civil matter, whether contentious or
non-contentious; (ii) the contract is reasonable in the circumstances of the
case including risk and uncertainty of compensation; (iii) the contract is not
vitiated by either fraud, mistake, or undue influence; (iv) the contract is not
contrary to public policy; and (v) the employment involves litigation, there is
a reasonable and bona fide cause of action.

It is expressly
stated in Rule 50(2) that a
lawyer cannot collect contingent fees in criminal matters. It is clear from the
above that the RPC does not expressly prohibit TPF in light of its approval of
contingent fee arrangement (for civil matters).

Legal Aid Council

The Legal Aid Council
(the Council) was established by the Legal Aid Act[4]
to ensure the grant of legal aid, advice and access to justice to
otherwise disadvantaged citizenry. By section 8 LAA the foregoing shall be
provided by the Council in three broad areas: (a) Criminal Defence Service, (b)
Advice and Assistance in Civil Matters, including legal representation in court
and (c) Community Legal Services subject to merits and indigence tests for the
parties. The LAA seeks to make provision for the establishment and operation
of a scheme for the granting in proper cases, legal aid and legal advice, to
people with low income, who could not otherwise afford to procure them for the
enforcement or vindication of a legitimate right or for obtaining a just
relief. As laudable as the actions of the LAC are, we must understand that not
every category of litigant can be covered by the legal aid scheme (LAS).

Section 10 LAA provides:
“(1) Legal aid shall only be granted to a
person whose income does not exceed the national minimum wage; (2)
Notwithstanding the provision of subsection (1), the Board may, in exceptional
circumstance, grant legal aid service to a person whose earning exceeds the
national minimum wage; (3) Notwithstanding the provisions of subsection (1) of
this section, the Governing Board may approve the giving of legal aid on a
contributory basis to a person whose income exceeds ten times of the national
minimum wage.”


It is clear from the
foregoing that some prospective litigants
with rightful claims are still outside the coverage of the legal aid scheme.

8(3) LAA
provides that “the
Council shall establish and maintain a service to be known as the Civil
Litigation Service for the purpose of assisting indigent persons to access such advice, assistance, and
representation in court where the interest of justice demands, to secure, defend,
enforce, protect or otherwise exercise any right, obligation, duty, privilege
interest or service to which that person is ordinarily entitled under the
Nigerian legal system.”

The purpose of the
LAS is to address fundamental rights cases for persons at the lower end of the
economic pyramid whose fundamental human rights have been allegedly violated. Section
11(1) LAA
provides that in ascertaining the means of any person for the
purposes of LAA, that person’s income and his personal and real property
shall be taken into account.

Arbitration and
Conciliation Act[5]

It is a fact that
arbitration is increasingly becoming the preferred mode for the resolution of
commercial disputes.  However, the costs
of arbitration have been a major concern to users and proponents of
arbitration. One way of reducing the cost of arbitration, thereby making it
even more attractive, is through TPF.

In the UK case of Essar
Oilfields Services Limited v. Norscot Rig Management PVT Limited,[6]

an application was made under section 68, Arbitration Act 1996 to
set aside a partial award. The Award was concerned only with the question of
interest and costs.  The costs included
litigation funding.   The litigation
funder, Woodsford Litigation Funding,
had made an agreement with Norscot in 2011, whereby it advanced to it about
£647,000 for the arbitration. That agreement entitled it, in the event of
Norscot’s success, to a fee of 300% of the funding or 35% of the recovery. In
that regard, Norscot sought from Essar a sum just over £1.94 million, being the
sum Norscot owed to Woodsford for the funding. The arbitrator held that he was
entitled to make order at his discretion, because such litigation funding costs
were “other costs” for the purpose of section 59(1)(c) Arbitration
, which refers to “legal or
other costs of the parties”
.   The
Court held that as a matter of language, context and logic, it seemed that “other costs” could include the costs of
obtaining litigation funding.

In Nigeria’s ACA,
section 49
defines “costs of
arbitration” but does not include “other costs” as in the UK.  Furthermore, section 49 is restrictive
in its definition of what costs entail and does not give much room for
arbitrators’ discretion.

In light of the
above, we must critically consider whether the time is ripe to revisit
applicability of the doctrine of champerty and maintenance. A significant
proportion of litigation has always been funded by third parties in the form of
insurers, trade unions or other interested bodies. However, the funding of
litigation by commercial funders who seek to make a profit from their funding
of litigation is a more recent development. TPF would potentially facilitate filing
of meritorious claims that would have been otherwise not litigated. It may help
the economically weaker party to get closer to a level playing field against a well-funded
opponent. For instance, where a person has a claim for medical negligence
against a well-established hospital, TPF can grant such a prospective litigant
access to resources to successfully proceed with his action.


Legislative Approach:
Hong Kong and Singapore

In June 2017, the
Hong Kong legislature passed the Arbitration and Mediation (Third Party
Funding) (Amendment) Bill
into law. This new legislation expressly
permits TPF agreements and authorizes a body to issue a code of practice for TPFers.
The legislation requires parties to disclose to the arbitration body (which
includes the arbitral tribunal) and opposing parties if a TPF agreement is in
effect, along with the name of the TPFer, either before arbitration commences
or within fifteen days of the TPF agreement’s adoption, whichever is earlier.

Like Hong Kong,
Singapore passed a Civil Law (Amendment) Bill in January 2017 to permit TPF
agreements for arbitration. Singapore considered that opening up TPF to arbitration
was necessary in order to remain a competitive international arbitration hub.
The Singaporean government also introduced the Civil Law (Third Party Funding)
to set out eligibility requirements for TPFers, including a
requirement in Rule 4 of the said Regulations that TPFers must have “paid up share capital of not less than US$5
The Singapore International Arbitration Centre (SIAC) also issued
its revised Investment Arbitration Rules in January 2017, which permit
arbitral tribunals to order disclosure of the existence of TPF agreements and
names of TPFers.

Under the Singapore
model, a typical funding agreement will include provisions for calculating the
maximum amount of money the funder will contribute to the legal representation,
the portion of the return that the funder will expect to receive upon success,
and the maximum adverse costs award that the funder would pay, if any, in the
event that the client loses the case.

Ad Hoc/Juridical
Approach: England and Wales

In England and Wales,
statutory amendments in the late 1960s abolished the torts and crimes of champerty
and maintenance. Common law prohibitions on champerty and maintenance do still
remain and such arrangements would be contrary to public policy and
unenforceable as a result. The courts have, however, played a significant role
in relaxing (and thereby developing) the rules on champerty and maintenance,
particularly in respect of TPF.

In England and Wales,
a TPF arrangement will generally only amount to maintenance or champerty where there is an element of impropriety
such as disproportionate profit or excessive control of the proceedings
the TPFer. The English courts have gone further by highlighting the important role
TPF can play in providing access to justice and downplaying historic concerns
over such funding. Historic concerns included the risk of justice being
corrupted and/or inappropriate third party meddling in proceedings.

South Africa

South Africa (SA)
does not prohibit TPF. SA courts first tackled the topic as far back as 1894,
when in Hugo & Moller N.O v. Transvaal Loan, Finance and Mortgage Co,[7]
it was ruled that agreements to share proceeds of lawsuits – or pactum de quota litis – are not
necessarily illegal, and could be upheld or otherwise at the discretion of the
courts, based on the structure of the agreement and the peculiarity of the
situation. In 1997, the enactment of the Contingency Fees Act, “no win, no
fee” agreements became legally enforceable. 
Accordingly, there are companies such as Litigation Funding SA, South
African Litigation Funding Company Limited engaged in litigation funding as
their primary business.


It is instructive to
note some of the factors that are the main driving forces in the demand for TPF
– the maxim ubi jus ubi remedium is a
cardinal principle underlying our jurisprudence and by extension the very
justification of the legal profession. 
What happens if there is a wrong and the victim has no resources to sue?
Should citizens be denied access to justice because of the source of their
funds for litigating the suit? 


In a country like ours
with endemic poverty and where many parties simply cannot afford the disproportional
cost of access to justice and consequent inability to ventilate the grievances,
should we continue wholesale application of champerty and maintenance?  Truly, “there
should be an end to litigation
”, but not at the cost of injustice that
would result from lack of financial capacity to prosecute meritorious claims.

In the absence of any
legislation, it is my opinion that Nigerian courts should consider every matter
on a case by case basis. The claim that TPF would lead to a hoard of
unwarranted litigation has no merit as no investor would readily invest in a
suit which does not have the likelihood of success especially considering the
expensive nature of arbitration/litigation. It is time for TPF to be embraced
in Nigeria’s judicial system firstly for the purpose of expanding access to
justice as well as opening an untapped business avenue.

Okeke is a commercial lawyer and practices with Messrs LeLaw Barristers &


[1] [2001] 13 NWLR (Pt.729)
Pg. 161 at 181
[2] (2015) LPELR-24902
[3] (No.8) [2002] 3 WLR 1104
at para 32.
[4] No. 17 2011
[5] CAP A18 LFN 2004
[6] [2016] EWHC 2361
[7] [1894] 1 OR 339 at 340