Litigation Crowdfunding and Access to Environmental Justice

Introduction

Litigation crowdfunding can be defined, per Raghupathi, as ‘a large number of individuals (the crowd) who are willing to donate, represent the financial backer; [i]instead of investing a large sum of money toward the litigation, most of these individuals donate small amounts’.^[1] This is emerging as an important means of litigation funding, particularly with the establishment of platforms such as ‘CrowdJustice’ as a quick and easy means of donating to a particular cause or individual.^[2] As an approach to financing litigation it has the potential to enable activists and advocates to advance cases on behalf of marginalised groups. However at present there is a risk that litigation crowdfunding would run afoul of the rules of maintenance and champerty. The former refers to the funding of litigation by a person who has no legitimate interest in the proceedings.^[3] The latter is funded by a third party where the third party is promised a portion of the proceedings in the event of successful litigation.^[4] This article will focus on the benefits and challenges of litigation crowdfunding for access to environmental justice.

 

Environmental Ligation and Crowdfunding

From an environmental perspective, litigation crowdfunding could further allow marginalised communities to pursue cases advancing environmental justice. This may be necessary given the deficiencies in Ireland’s current system of  legal aid for environmental cases. In Friends of the Irish Environment v the Legal Aid Board for example,^[5] the NGO which had successfully taken the case that struck down Ireland’s deficient Climate Action Plan,^[6] was denied access to civil legal aid. This denial was on the basis that the NGO was not a natural person, meaning environmental activists must identify an individual willing to incur significant financial risk, due to the possibility of an adverse costs order, to be eligible for some form of civil legal aid. Litigation crowdfunding on the other hand would circumvent these difficulties by spreading the potential financial risk among a large body of individuals or alternatively by securing a pre-emptive costs fund. This is highly relevant for access to justice and public interest litigation, with panellists at the recent Voluntary Assistance Scheme of the Bar of Ireland Conference noting that strategic litigation is often a battle of attrition related to costs.^[7]

Indeed, crowdfunding has already been utilised in an ECHR context to bring cases pertaining to the intersection between human rights and the climate crisis. The platform ‘CrowdJustice’ was used to fund the case taken by a group of Portuguese children, who claim that European Convention Member States are violating their right to life by failing to act on climate change.^[8] The ECHR has accepted the case and is expected to make a ruling on the matter in the coming months. More recently, ‘CrowdJustice’ has been used in the UK to fund a case being taken by climate activists alleging that the UK governments Net Zero strategy is insufficient to achieve its stated objective of reaching net zero emissions by 2050.^[9]

Does the fact that both Strasbourg and the UK have allowed the use of crowdfunding make it more likely that Irish courts will be lenient in the context of crowdfunding environmental cases? The answer is not entirely straightforward. Firstly, the ECHR contains no rule against champerty, as the latter is derived from common law tradition, which is distinct from Convention jurisprudence. In a UK context, the rules against champerty have been relaxed and some third-party funding is allowed, subject to regulation via the Code of Conduct for Litigation Funders and judicial oversight of funding agreements.^[10] There is also a self-regulating independent body called the Association of Litigation Funders to police the actions of crowdfunding litigation platforms.^[11] Ireland has yet to follow the UK in implementing such a regulatory framework. In the absence of further guidance, Ireland remains wedded to more traditional, and therefore strict prohibitions on champerty and maintenance. There is however an exception to the rule against champerty where the third party can demonstrate they have a legitimate interest in the case. The scope of what constitutes a legitimate interest in the context of public interest litigation remains somewhat unclear. This is evident from the most recent ruling on the matter in Persona Digital Telephony Ltd v. Minister for Public Enterprise, Ireland, [2017] IESC 27.

 

Implications of Persona for Crowdfunded Environmental Litigation

Persona saw the plaintiffs enter into a funding arrangement with a third-party investment fund in order to pursue litigation that would challenge the awarding of a mobile phone licence contract to the company Esat Digifone, owned by prominent businessman Denis O’Brien. They asserted that such an arrangement should be allowed on the basis that the case was of public importance and could not proceed without the third-party funding. The Court dismissed this claim, with Denham CJ stating “I do not find the fact that the funding was provided during the course of the proceedings a relevant factor. Nor do I consider the fact that the case is described as one of immense public importance to be a relevant factor”.^[12] Further, any suggestion that the common lawn on champerty be developed to accommodate cases of public importance was broadly dismissed as a matter best left to the legislature.^[13] This would imply that the court is highly tentative to vary the rule in order to broaden the use of third-party funding. Under the current formulation each donor would effectively need to prove a legitimate interest in the case.

However, it should be noted that Clarke J previously recognised that the scope of a legitimate interest included ‘charity’.^[14] Indeed he went on to say ‘‘[s]hareholders and creditors of the impecunious party could thus be ordered to pay costs, however, unconnected entities providing funding out of charitable intent could not”. This line of reasoning could leave the door open for crowdfunded litigation.^[15] A small donation from a vast pool of donors does not come with the expectation of a return on proceeds, while environmental justice cases could potentially fall within the definition of ‘charity’. Matters may be complicated however where the crowdfunding platform makes a small return on the collected fees where the case is successful. Axia Funder in the UK, for example, relies on attracting investment funds through the promotion of cases with a high likelihood of success and provides a return on investment where cases are successful.^[16] Such a model could potentially be used in environmental cases taken against fossil fuel companies that have a likelihood of compensation, however they would run contrary to the rules outlined in Persona. Thus, the court, in the absence of a regulatory scheme, would need to rule on whether each form of crowdfunding can be considered charitable on a case-by-case basis. This may complicate environmental justice cases, particularly given the courts’ fear that ‘‘[p]ermitting entirely unregulated third party funding … as a means of solving the problem of access to justice runs the real risk of creating more problems than it solves”.^[17]

Bridging the Regulatory Gap

It is clear that the courts see the contours of third-party litigation funding as a matter seriously implicated in questions of public policy. They have recurrently noted the potential interplay between third-party litigation funding and the constitutional right of access to the courts with an apparent commitment to altering the rules of maintenance and champerty in an appropriate case. Crucially they note that this would arise in the event the legislature did not act thereby facilitating an inhibition of the right of access to the courts. The emergent consensus is that this is principally an issue for the legislature to address albeit with a residual role for the courts.^[18] It would also be helpful more generally for the state to establish a regulatory scheme cornering litigation crowdfunding in order to avoid unnecessary semantics within litigation, particularly when environmental justice cases can be considered urgent, in light of both the existential and policy need to achieve net zero emissions by 2050.^[19]

Thus the state should follow the UK in providing further guidance on what can and cannot be considered a legitimate means of providing funding. In this regard, it may be helpful to draw up a list of legitimate crowdfunding sites, with sites such as CrowdJustice being eligible to apply for recognition. The state could also clarify what can be considered a ‘legitimate interest’, perhaps allowing for funding to be granted where a case is pursued to challenge or enforce state policy. For example, cases that seek to ensure the Climate Action Plan is adequately pursued by the government could be considered ‘legitimate’. A code of conduct similar to the UK’s would also assist in policing crowdfunding platforms and ensure donors are not exploited where plaintiffs fail to acquire the funding needed to pursue the case. The need for such intervention is well-documented with members of the judiciary, including Chief Justices, recurrently noting the need to adequately reform this and related areas of law with a view to ensure effective access to the courts.^[20] Addressing this matter prior to it becoming an experimental exercise by advocates or similar groups is strongly advised.

 

Conclusion

Crowdfunding litigation could be a game changer for improving access to environmental justice. Allowing climate activists to capitalise on the power of individual finance could see a greater breadth of cases taken and a reduced risk of financial collapse should those cases be unsuccessful. However, as Persona has demonstrated, there remains significant ambiguity between ‘legitimate’ crowdfunding litigation and funding which would contravene the rules of champerty. It is therefore recommended that a regulatory scheme be established that would identify legitimate interests with reference to broader social agendas such as the National Climate Action Plan, the National Action Plan Against Racism and the National LGBTQ+ Inclusion Strategy among others. Such a scheme would allow activists to link their cause to the public interest without broadening the scope of the rule beyond judicial comprehension. Environmental justice is one facet of a wider spectrum of cases that would benefit from crowdfunding litigation. Decision makers should now prepare to adopt regulatory schemes that recognize and embrace its potential for achieving widespread social justice.

 

[1] Viju Raghupathi et al., ‘Understanding the nature and dimensions of litigation crowdfunding: A visual analytics approach’ [2021] 16(4) PLOS ONE.

[2] See < https://www.crowdjustice.com/how-it-works/> for more on how crowdjustice works as a platform.  See also Michael Elliot, ‘Trial by Social Media: The Rise of Litigation Crowdfunding’ (2018) 84 University of Cincinnati Law Review 2.

[3] Hilary Biehler, 'Maintenance and Champerty and Access to Justice - The Saga Continues' 59 Irish Jurist (NS) 130 provides a useful discussion of this concept in an Irish context.

[4] ibid.

[5] [2020] IEHC 347; This is distinct from the ruling which forced the Irish government to draw up a new Climate Action Plan, FIE v Government of Ireland [2020] IESC 49.

[6] For more on this see Orla Kelleher, ‘A critical appraisal of Friends of the Irish Environment v Government of Ireland’ (2020) Review of European, Comparative and International Law.

[7] PILA, ‘Law & Social Change: PILA reports on the Bar of Ireland Voluntary Assistance Scheme Conference 2022’ (5 October 2022) <https://www.pila.ie/resources/bulletin/2022/10/05/law-social-change-pila-reports-on-the-bar-of-ireland-voluntary-assistance-scheme-conference-2022> accessed 11 October 2022.

[8] Duarte Agostinho and Others v. Portugal and 32 Other States (2020) ECHR Communication 39371/20 and Sandra Laville, ‘Portuguese children to crowdfund European climate change case’ (The Guardian 25th September 2017) https://www.theguardian.com/world/2017/sep/25/portuguese-children-crowdfund-european-climate-change-case-sue-47-countries accessed 26/06/2022.

[9] See  ‘Net Zero: The Government must take the climate crisis seriously’ <https://www.crowdjustice.com/case/net-zero-government-climate/ for the link to the funding page and Goodlaw Project V Secretary Of State For Business Energy And Industrial Strategy (2022) Co/199/2022 for the Court order accepting the case for judicial review.

[10] Simon Latham and Glynn Rees, ‘The Third Party Litigation Funding Law Review: United Kingdom – England &amp; Wales’ (The Law Reviews 22 November 2021) <https://thelawreviews.co.uk/title/the-third-party-litigation-funding-law-review/united-kingdom-england--wales>  accessed 22/06/2022.

[11] ibid.

[12] Persona Digital Telephony Ltd v. Minister for Public Enterprise, Ireland, [2017] IESC 2 Denham CJ at 54.

[13] ibid MacMenamin J at 7; ‘Clearly, therefore, significant policy questions might arise in the event of a finding of unconstitutionality in the case of maintenance and champerty. But legislation takes time. All these are matters for another day, and, perhaps, for the legislature rather than the courts.’

[14] Thema International Fund Plc v HSBC Institutional Trust Services (Ireland) Ltd[2011] IEHC 357 Clarke J at 5.6. This aspect of the case was quoted approvingly in Persona by Denham CJ at 51.

[15] ibid.

[16] ibid (n 1).

[17] SPV Osus Ltd v. HSBC Institutional Trust Services (Ireland) Limited &amp; Others [2018] IESC 44 Clarke CJ at 2.2.

[18] Hilary Biehler, 'Maintenance and Champerty and Access to Justice - The Saga Continues' 59 Irish Jurist (NS) 137.

[19] Policy considerations are derived from the Paris Agreement 2015, the European Green Deal 2020, the National Climate Action Plan 2021 and the Climate Action and Low Carbon Development (Amendment) Act 2021 among others.

[20] Law Society Gazette, ‘’Shrinking sub-set’ of cases stifles access to justice’ (6 October 2021) < https://www.lawsociety.ie/gazette/top-stories/2021/10-october/shrinking-sub-set-of-disputes-in-court-compromises-access-to-justice> accessed 11 October 2022; Andrew McKeown ‘Chief Justice launches report on litigation funding and class actions’ (Irish Legal News, 31 January 2020) < https://www.irishlegal.com/articles/chief-justice-launches-report-on-litigation-funding-and-class-actions> accessed 11 October 2022.