Champerty and maintenance: Addressing common questions about legal finance

The common law doctrines of champerty and maintenance are largely irrelevant to modern legal practice. For this reason, they have been specifically abolished in many jurisdictions and are largely obsolete in jurisdictions where they still exist. Thus, they are not considerations in the use of commercial legal finance as practiced by Burford in the jurisdictions in which we operate. 

Maintenance is the practice of helping another to maintain a suit, generally by providing financial assistance. Champerty occurs when a party maintaining another seeks a share of the proceeds of the matter. Originating in ancient Greece and assimilated into medieval English law, the doctrines were developed to prevent feudal lords from leveraging their financial position to sponsor frivolous lawsuits against rivals for personal gain, a concern that is far removed from modern realities. 

In the US, a limited number of states have statutes emulating common law champerty and maintenance, but these are limited in scope and do not apply to commercial legal finance as practiced by Burford. Most US states either never adopted champerty prohibitions or have explicitly abolished their champerty rules.   

The doctrines of champerty and maintenance were effectively abolished as crimes and torts in England and Wales by ss.13 and 14 of the Criminal Law Act 1967 (CLA 1967). English courts have found that a legal finance agreement would only fall foul of the modern-day interpretation of the champerty rule if it had “a tendency to corrupt public justice".

In Australia, while the torts of maintenance and champerty have not been formally abolished in some states, New South Wales passed the Maintenance, Champerty and Barratry Abolition Act in 1993. Further, in 2006 the High Court of Australia’s ruling on Campbells Cash and Carry Pty Limited v Fostif Pty Ltd clarified the permissibility of legal finance by holding that funding was not an abuse of process or contrary to public policy.  

Finally, while maintenance and champerty still apply to commercial litigation proceedings in Singapore and Hong Kong, juridical pronouncements have narrowed the scope of the doctrines and confirmed that they do not apply to the funding of insolvency or international arbitration proceedings.  

Far from maintaining frivolous lawsuits, commercial legal finance can actually provide a check and balance against unfounded and unmeritorious claims. Because legal finance is provided on a non-recourse basis, a legal finance provider loses its investment and earns no return if the claim being financed is not successful. Therefore, legal finance providers have a clear economic incentive to select claims with strong legal merits, and the legal finance diligence process can provide a valuable screen against less meritorious claims.

In this blog series, Burford addresses common questions that clients have about legal finance. Learn more about other common ethics questions like control and disclosure and work product.