TPF and its alternatives: An economic appraisal

In many legal systems there is increasingly a variety of techniques which are developed to promote access to justice. It can be argued that from society’s perspective, promoting access to justice fulfils an important goal, not only from the point of view of social justice (providing victims-plaintiffs with the opportunity to enforce their rights), but also from an economic angle. Limits on access to justice may lead to a situation whereby social costs are thrown on society at large and not sufficiently internalized. It is therefore no surprise that in many legal systems a variety of techniques has been developed or is in full development in order to encourage access to justice, particularly for plaintiffs who may have meritorious claims but who simply are not in the financial position to bring their claim. Moreover, encouraging access to justice is also a way of stimulating private enforcement of laws, which is high on the policy agenda in many jurisdictions.
It is in this context also that third party funding of litigation has emerged. From an economic perspective, third party funding can be considered as a remedy for cases where individuals do not bring claims because they do not possess sufficient funds to bring the claim, and do not have access to other ways of financing their claim. It can also mitigate the market failure that can occur in cases of so-called dispersed losses, where rational apathy may occur.
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