London: Using the internet to harness the financial power of crowds is hardly novel. Almost since the first electronic impulse pinged its way across the world wide web, entrepreneurs have been dreaming up sites to facilitate everything from charitable donation to hard-nosed investment.
Peer-to-peer lending is now almost part of the mainstream. JustGiving, the charitable portal, has been going since 2000. But employing the web to raise money for legal actions remains a less well ploughed piece of virtual terrain.
At first glance, you might wonder why this is. There is already a booming offline trade in the commercial funding of litigation, especially in America and Britain, whether through lawyers’ no-win, no-fee arrangements or third-party investment. And, indeed, a few pioneering crowdfunding vehicles have recently emerged in the US.
One such is Invest4Justice, a site that boldly touts returns of “500 per cent plus in a few months”.
Whether these eye-catching figures are ultimately deliverable is — as lawyers like to say — moot. But there are risks in seeking to share the fruits of a third-party’s action that can make it perilous for the crowdfunding investor. One is that when actions fail, those same backers might have to pay not only their own, but the successful party’s, costs.
Invest4Justice may base its pitch on the idea that 95 per cent of US litigants settle before they come before a judge. But courts tend to be suspicious that those with purely financial interests may flam up evidence or drag out proceedings.
Indeed, until the 1990s, speculatively funding someone else’s case was largely illegal in Britain. Even now, when costs are awarded against financial investors these may involve an obligation far beyond the original pot staked on the outcome.
In 2013, the English high court ruled that certain commercial investors that backed a corporate dispute over some Kurdish oil wells were liable for third-party costs running to tens of millions of pounds. That was on top of the 14 million pounds they had originally staked on backing the claimant’s costs, and was ordered even though they were passive participants who exercised no control over the action.
Such risks explain why those who play this game are professional investors — sufficiently well heeled to do their due diligence and also to live with the consequences of steep losses when they occur.
But not all crowdfunding ventures seek to reward participants in the currency of cold financial return. Crowdjustice, Britain’s first legal crowdfunding website, seeks to scratch quite a different itch in the psyches of its participants.
Founded by Julia Salasky, a former employee at the London magic circle firm Linklaters, it selects public interest cases, publicises them on its website and invites the public to fund them.
Among the causes it has taken up are a criminal appeal and a planning dispute in Lancashire involving a landfill site. The only real requirement for consideration is that the legal David confronting the corporate or governmental Goliath must have already engaged a lawyer to take on their case.
Backers are pure donors with no financial interest in the outcome. Indeed, they have no right even to information about the conduct of the case, although the website advises those whose litigation is backed that it might be thoughtful to catch up with sponsors for a chat over a cup of tea.
This certainly means the risk of being dragged into proceedings is far lower. But it also raises a question: why would the public want to donate money to lawyers in the first place?
Salasky thinks it ranges from a sense of justice to enlightened self-interest. “Donors can be people who take human rights seriously, but they could also be those who worry that something which is happening to someone else could also happen to them,” she says. It is one reason why perhaps the most potent application is seen to be in the fields of environmental and planning law.
Whether Crowdjustice serves a broader social function, or simply becomes a go-to site for Nimbys who reflexively oppose physical development, it highlights a broader question about access to justice. Deep cuts in legal aid in recent years have reduced the scope of official assistance for poorer litigants in the UK.
“Access to the courts shouldn’t become simply the privilege of the rich,” says Salasky.
Whether there are enough kind strangers to make a difference remains to be seen. But for all its crowd-harnessing power, the web is only likely to be part of the answer.
If access to justice is the objective, its cost must also fall.
— Financial Times
