Crowdfunding: changing the legal landscape

What is crowdfunding?

Crowdfunding is a way to raise money from friends, family and other supporters online. Over the past decade we’ve seen this model of funding become increasingly popular as a way for startup companies and charities to source online donations from the general public, and we’re now seeing this approach being adopted in the legal sector.

As every lawyer knows, taking legal action is costly, complex and unpredictable. The expense involved can be prohibitive: without adequate financial resources, people can be prevented from accessing not just the courts, but basic legal advice. Designed by lawyers, for lawyers and their clients, CrowdJustice is a donation-based crowdfunding platform built for legal matters which gives people the tools they need to raise funds to cover their legal costs.

Since launching in 2015, hundreds of thousands of people have donated nearly £10 million to support hundreds of cases on CrowdJustice. From high profile judicial reviews to personal immigration matters, CrowdJustice is working to enable more people to access the legal system and give ordinary people the chance to have a more interactive relationship with the legal process. 

What cases can be crowdfunded?

Crowdfunding works for legal matters of all kinds and sizes. People can raise as much or as little as needed, and in stages – from a few hundred pounds for initial legal advice to hundreds of thousands of pounds for an appeal to the highest court.

CrowdJustice does not assess the merits of the legal action for which people are raising funds. However, it is a requirement that all cases have a lawyer instructed or an associated non-profit organisation. For us this is critical to gaining trust online – people donating to a legal matter on CrowdJustice can be assured that the matter has been taken on by a firm and there is transparency over the flow of funds.

Making history

Elaine Motion, executive chairman and litigation partner at Balfour+Manson, acts for clients who are crowdfunding to bring legal action addressing a key constitutional question surrounding the UK’s potential withdrawal from the EU. She describes her experience with crowdfunding as follows:

“We act for a number of Scottish MPs who have successfully secured a reference to the European Court of Justice from the Court of Session on whether article 50, triggering the Brexit process, can be revoked. Working with the Good Law Project, our clients have raised £175,000 from thousands of backers enabling us to take this action forward. Funds raised enabled us to navigate a complex constitutional challenge from the Outer House to the Inner House of the Court of Session (both twice), as well as defend an application by Westminster to appeal to the Supreme Court and stay or withdraw the reference to the CJEU. The matter was heard at the CJEU on 27 November 2018.

“This litigation is one of the most important constitutional challenges this decade and the CJEU’s ruling has the real potential to shape the future of the UK’s relationship with the EU. By raising crowdfunding, our clients gave everyone the opportunity to participate in a challenge which will affect not only their lives, but those of future generations.”

Not just for high profile cases

While people have used CrowdJustice to effect large scale change, it’s not just a tool for high profile judicial reviews. Crowdfunding is being used as an effective means of raising funds for more local or personal issues, from individual immigration matters to residents’ associations challenging development. 

A crowdfunding model built for legal

CrowdJustice provides a donation-based online platform that is sensitive to the needs of funding in the legal marketplace. CrowdJustice provides an easy and effective way for clients to raise funds for their legal costs, while supporting lawyers to ensure that existing regulatory and compliance obligations are discharged.

Some examples of the safeguards which CrowdJustice has in place range from verifying that a regulated lawyer (or NGO) is instructed in every case on the platform, to undertaking robust compliance on all parties, including anti-money laundering checks on donors, to be in conformity with lawyers’ client money rules.

It also has an unused funds policy in the event a case raises more than it needs, or settles before all sums raised are spent. Sometimes people are raising funds for non-contentious matters or for initial legal advice, but sometimes they are raising for litigation proceedings, which are inherently unpredictable and often involve multiple stages of proceedings. This means we have put a lot of effort into giving information and transparency over target amounts, providing tools to go back to backers for a top-up where necessary, and ensuring that backers know that their money will go to further access to justice even where there are unused funds. 

How lawyers are using CrowdJustice

Crowdfunding has been used to enable clients to pay for legal fees (both for solicitors and counsel) and disbursements, and to help cover the exposure to the risk of adverse costs as well as a number of other legal expenses. When it comes to legal fees, it enables lawyers to get paid privately and up front. Crowdfunding can also be used in conjunction with a conditional fee agreement as a way to reduce the risk the firm bears on the client being awarded damages, and to cover out-of-pocket expenses like court fees or expert reports. Nothing about using CrowdJustice alters a client’s relationship with their lawyer or the courts; ultimately, the client remains responsible for all costs associated with the case. 

Crowdfunding v litigation funding

CrowdJustice provides a donation-based model of crowdfunding: individuals donate to causes they care about, which are displayed on CrowdJustice’s platform. Those who donate – we call them backers – have no financial interest in the outcome, nor do they have any input into how the legal case is run. Backers donate because they care about the issue and want to help others to access the justice system.

CrowdJustice’s model is a form of “pure funding”, not litigation finance. The principle of pure funding provides that donors who do not control the litigation, and do not have a financial interest in it, will not be exposed to adverse costs. That was established in Hamilton v Al Fayed (No 2) [2003] QB 1175 (CA). This approach recognises that a single person may not be able to afford the full costs of bringing a legal challenge, and also provides a high degree of comfort for philanthropic giving to legal action. The typical donation to CrowdJustice (an average of £35) raises a further de minimis protection, making satellite litigation around costs inappropriate.

Looking to the future

CrowdJustice aims to make the law more accessible for everyone. But achieving access to justice means more than simply increasing access to the courts, and the impact of CrowdJustice goes beyond raising funds for individual legal action. CrowdJustice provides a platform to raise awareness of important legal issues. It enables people who donate to get a front row seat to the legal process in action. CrowdJustice increases transparency in the legal system and improves people’s ability to engage meaningfully with the law. It provides individuals and communities with the tools they need to build support for the legal issues that matter to them, making access to justice more achievable than ever before.