What Is Champerty?

Champerty is a legal doctrine that prohibits a party from supporting another's lawsuit in exchange for a share of the litigation's proceeds.

Historically, it was developed to prevent wealthy or influential individuals from meddling in legal disputes to share in any awarded damages, thereby discouraging frivolous or manipulative lawsuits.

This concept originated in medieval law as part of the broader prohibitions against maintenance (the improper support of litigation by a third party) and barratry (the frequent incitement of lawsuits and quarrels).

Champerty Explained

Champerty specifically involves an agreement where one party (the champertor) agrees to finance someone else's lawsuit in return for a portion of the monetary awards from the case. The critical elements of champerty include:

Financial Support: Providing funding for the litigation costs of another party's lawsuit.

Conditional Interest: The supporter's compensation is contingent upon the success of the lawsuit.

No Other Justifiable Interest: The supporter typically has no legitimate interest in the lawsuit other than the potential financial gain from the outcome.

While champerty was once universally prohibited, modern legal systems in many jurisdictions have relaxed or abolished these restrictions, particularly in the context of litigation financing or legal funding companies. These entities argue that financing can provide access to justice for those who might otherwise be unable to afford legal representation.

The Term Champerty in Different Legal Contexts

The application and acceptance of champerty vary significantly across different legal systems and jurisdictions. For instance:

Common Law Jurisdictions: Historically, common law countries viewed champerty very unfavorably. However, recent years have seen a more nuanced approach, with some jurisdictions allowing litigation funding under specific regulations to prevent abuse.

Civil Law Countries: Many civil law jurisdictions do not have a direct equivalent of champerty, as the concept is largely rooted in common law. However, they may have other mechanisms or ethical guidelines regulating third-party involvement in litigation.

Litigation Funding: Modern litigation funding, where companies invest in lawsuits in exchange for a portion of the settlement or judgment, operates in a legal gray area related to champerty. These arrangements are carefully structured to comply with local laws and avoid the negative implications associated with champerty.

Common Misconceptions About the Meaning of Champerty

A common misconception is that all forms of litigation funding or financial support for lawsuits are illegal or unethical due to champerty. In reality, the legal landscape has evolved, and many jurisdictions now permit third-party funding under specific conditions, recognizing it as a way to level the playing field for plaintiffs who might not have the resources to pursue legitimate claims.

Another misunderstanding is that champerty applies to any external financial assistance in legal matters. However, the doctrine specifically concerns arrangements where the third party's compensation is contingent upon the lawsuit's success and does not cover situations like traditional loans or legal aid services.

Lastly, there's sometimes confusion between champerty and contingency fees, where a lawyer's payment is contingent on the case's outcome. While superficially similar, contingency fee arrangements are not considered champerty since the lawyer actively represents the client in the legal action, providing direct services rather than merely financing the litigation.

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What Is Champerty?

Champerty Explained

The Term Champerty in Different Legal Contexts

Common Misconceptions About the Meaning of Champerty

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