Contract’ Validity of Third Party Litigation Funding in American Law; with a view on Iran Law

Commercialization of justice and increasing in litigation costs (court costs, fees etc.) has challenged access to court for some individuals. In order to remove this problem and facilitate their access to court, various mechanisms such as contingency fees, legal expenses insurance and funding litigation costs by third parties have been devised. The latter institution is an aleatory contract that for first time established during 1990S in Australia and then was accepted in other countries. The contract is concluded between a funder and a plaintiff, by which the former pays plaintiff’s litigation costs in exchange for share of recovery. There are arguments for and against this contract. In US legal system, The critics consider the contract void due to being Qarar, ignoring the prohibition of maintenance and champerty rules, contrast with public order, increasing the cases, encouraging unmeritorious claims and reducing the settlement’s incentive. Conversely, it could be considered valid based on the society’s need and social and economic interests, facilitating individual’s access to court, preventing from private justice, increasing incentive to settle and preventing to file baseless suit.