Nigeria has a population of over 180 million people. The country is organised under the federal Constitution,2 which creates court systems at the federal and state level and recognises arbitration and other dispute resolution processes such as expert determination, mediation and negotiation.

The Constitution grants every citizen the right to air his or her grievances before a court of law or arbitration when he or she feels his or her civil rights (which includes commercial rights) have been breached or are likely to be breached. However, litigation or arbitration does not come cheap. As such, a large number of people who cannot afford to fund their cases in court or arbitration seek other means of expressing their grievances. This includes customary settlement of disputes, mediation, negotiation and sometimes self-help.

Some individuals or organisations may enter into agreements to sponsor or fund litigation or arbitration with the intention of sharing the proceeds of the case. This is known as third party funding.

Third party funding of litigation can be defined as an arrangement whereby a person who ordinarily is not concerned with the outcome of a suit bears the costs of the action for one who is concerned, to share the proceeds of the action or suit, if any. In other words, the third party funder has no previous interest in the lawsuit but finances it as an investment, with a view to sharing the proceeds of the suit if the suit succeeds, as a return on his or her investment. Such an investment arrangement may arise for various reasons, all of which, basically, revolve around the fact that a direct party to a lawsuit, whether a named claimant or a defendant, cannot fund the prosecution or defence of the suit and a third party was required to provide the named party with the funds, on the agreement or understanding that the third party would share from the proceeds of the case, if any.

It is acknowledged that, as in other jurisdictions, there are some lawyers or not-for-profit organisations who as third parties take up certain matters pro bono or fund some cases on behalf of indigent people. In most cases, the lawyers or not-for-profit organisations take up the matter without anticipating sharing in the proceeds of the case. However, this chapter will be restricted to the system of third party funding agreements as defined above and will consider the legality of such agreements under Nigerian law.

Nigeria has diverse economic and sociopolitical interests that are usually the subject of judicial discourse.

The systems of land use, free-market economy, politics and marriage, and the natural resources and ethnic and religious differences existing in Nigeria make the jurisdiction a hotspot for disputes. In the commercial sphere, the country is among the major producers of crude oil and is also a major importer of refined oil products and other commodities. Real estate transactions, trade, consultancy, banking, construction and telecommunications are among Nigeria's active economic sectors, as well as being the major sources of commercial litigation and arbitration in the country.

The activities and interests that prevail in the country often attract foreign direct investment. Consequently, entities often enter into commercial agreements with individuals, government agencies, multinational companies or other small-scale companies. Invariably, a large number of these commercial agreements often contain dispute resolution clauses that are either by means of arbitration or litigation.

Litigation in Nigeria (dispute resolution) is essentially adversarial and sometimes requires huge funds for effective utilisation by the disputing parties. The costs for legal representation, filing processes, compiling exhibits and mobilising witnesses to court have substantially increased over time, particularly in view of the recent economic recession in Nigeria, thereby making it increasingly difficult for aggrieved parties to afford the costs of litigation. They may thus need to resort to third party funders for assistance.

It is important to note that, under Nigerian law, third party funding of litigation is generally regarded as champertous if it involves a third party's election to maintain and bear the costs of an action for another to share the proceeds of the action or suit.

In Nigeria, parties to civil actions are usually responsible for their litigation costs. There are instances, however, where the claims may be sponsored by third parties with no prior connection to the suit either for pecuniary, financial or proprietary interests. For instance, in most class actions that are often used to pursue claims for oil spillages, pollution and communal land matters, there is the likelihood that some of the claims are funded by independent third parties in view of the pecuniosity of the litigants. Also, in some election petition cases or pre-election matters, the suits are usually funded by the political parties even though they may not be direct parties to the suit. This is because the practice of independent candidacy is not allowed in Nigeria, as a candidate must contest an election on the platform of a political party and the party will either fail or lose if the candidate fails or loses the suit. In some maritime cases too, particularly matters involving ships and vessels, some litigation is insured or funded by insurance companies or finance houses.

Parties to potential or ongoing litigation or arbitration in the commercial sectors such as oil and gas, construction, concession, debt portfolio management and international trade require huge financial assistance from third parties to prosecute the motley of litigation that arises from transactions. They resort to informal sources such as family, friends and loan sharks (who are not ordinarily or directly affected by the subject matter or outcome of the lawsuits or arbitral proceedings) for financial assistance in prosecuting their suits in courts or before arbitral tribunals.


Litigation funding is not currently prevalent in Nigeria; as a result, there is no clearly defined legal framework for third party funding to operate within the country.

One of the main sources of law recognised in the Nigerian legal system is 'common law and equity'. The principles of common law and equity are applied in every aspect of the law except where a statute has been enacted by the Nigerian legislature to cover the same subject matter or cause of action. However, in areas where there are no local enactments, the principles of common law and equity still hold sway. A practice that is closely related to third party funding is the common law principle of champerty and maintenance. At common law, champerty is a form of maintenance and occurs when the party maintaining another person demands a share of the proceeds of the action or suit or other contentious proceeding where property is in dispute.3

Champerty is defined by Black's Law Dictionary as:

[A] bargain between a stranger and a party to a lawsuit by which the stranger pursues the party's claim in consideration of receiving part of any judgment proceeds. It is one type of maintenance.4

Maintenance, on the other hand, is defined as:

[A]n officious intermeddling in a lawsuit by a non-party by maintaining, supporting or assisting either party with money or otherwise to prosecute or defend the litigation.5

In Oyo v. Mercantile Bank (Nig) Ltd,6 the Court of Appeal defined maintenance as:

Improperly stirring up litigation and strife by giving aid to one party to bring or defend a claim without just cause or excuse.

There is no legislative provision or rule that expressly prohibits third party funding in Nigeria. While in some cases champerty and contingency fee arrangements may have been considered by the Nigerian courts, there appears not to have been any express judicial pronouncements as to third party funding of litigation.

The Nigerian legal system adopted the common law stance on champerty and maintenance to the effect that lawyers were prohibited from funding their clients' cases. Thus, in Oloko v. Ube, the Court of Appeal held that:

[A]n agreement by a solicitor to provide funds for litigation or without charge to conduct litigation in consideration of a share of the proceeds is champertous. The solicitor cannot recover from his client his own costs or even his out of pocket expenses.

In the case of Oyo v. Mercantile Bank (Nig) Ltd, the Court of Appeal tried to distinguish between contingency fee arrangements and champerty and maintenance. The Court defined contingency fee arrangement as fees to be earned by a solicitor only if he or she wins the litigation, while champerty was described as the bedrock of maintenance and is usually regarded as having a reprehensible basis. Both contingency fee arrangements and champerty and maintenance were prohibited in Nigeria under common law. In the above case, the Court explained that the rationale behind the prohibition of such an arrangement was that it fires the solicitor's interest beyond his or her mere professional commitment and may render the whole transaction unethical. In the case at hand, the appellant, a legal practitioner, entered into a contingency agreement with the respondent to recover debts from his debtors and to be remunerated with a certain percentage of the total debts recovered. The appellant took steps necessary to recover the debts – he wrote several letters to the debtor, instituted court actions and filed several motions in court. However, while the matter was still pending and before a judgment could be delivered, the respondent negotiated with the debtors and had the money paid. The respondent then asked the appellant to withdraw the matter from court. The appellant, having withdrawn the case, submitted a bill of charges to the respondent that covered the agreed percentage of the total amount of debts involved or, in the alternative, reasonable or substantial quantum meruit. The bill was not honoured by the respondent. The appellant sued the respondent for failure to honour the bill of charges. One of the issues raised by the respondent in Court was whether the appellant was guilty of champerty when he agreed with the respondent to receive a certain percentage of the amount recovered in consequence of litigation. The Court held that merely agreeing to receive a percentage of the proceeds of litigation to be conducted by a solicitor does not amount to champerty. It is a contingency fee agreement that could be regarded as contrary to public policy. The Court described such agreement as an unprofessional agreement that is unenforceable in law.7 Adopting the decision of Lord Denning MR in Re Trepca Mines Ltd,8 the Court, gave the rationale for prohibiting champerty as follows:

[T]he reason why the common law condemns champerty is because of the abuses to which it may give rise. The common law fears that the champertous maintainer might be tempted, for his own personal gain, to inflame the damages, to suppress evidence, or even to suborn witnesses. These fears may be exaggerated, but, be that so or not, the law for centuries has declared champerty to be unlawful and we cannot do otherwise than to enforce it.

However, following the enactment of the Rules of Professional Conduct for Legal Practitioners 2007, pursuant to the Legal Practitioners Act, this legal position has been amended somewhat. To a large extent, the Rules relaxed the practice or norm prohibiting a legal practitioner from funding litigation. In this context, Rules 50 and 51 are applicable and provide as follows:

50. (1) A lawyer may enter into a contract with his client for a contingent fee in respect of a civil matter undertaken for a client whether contentious or non-contentious. Provided that –
(a) the contract is reasonable in all the circumstances of the case including the risk and uncertainty of the compensation;
(b) the contract is not –
(i) vitiated by fraud, mistake or undue influence; or
(ii) contrary to public policy.

. . .

(5) In this rule, 'contingent fee' means fee paid or agreed to be paid for the lawyer's legal services under an arrangement whereby compensation, contingent in whole or in part upon the successful accomplishment or deposition of the subject matter of the agreement, is to be of an amount which is either fixed or is to be determined under a formula.
51. A lawyer shall not enter into an agreement to pay for, or bear the expenses of, his client's litigation, but the lawyer may, in good faith, advance expenses –
(a) as a matter of convenience; and
(b) subject to reimbursement.

From the above provisions, while a lawyer is allowed to enter into a contingency fee agreement, he or she is not allowed to bear the expenses or costs of litigation. There are, however, exceptions to the general rule – a lawyer may be allowed to advance the cost of litigation as a matter of convenience and subject to reimbursement.

In the more recent case of Kessington Egbor, the Court of Appeal was confronted with the issue of whether agreement for a contingency fee arrangement or commission payable upon recovery of indebtedness is champertous. A summary of the facts of the case is that Kessington Egbor and a company he had an interest in (Eskol Paint Nigeria Ltd) (the appellants) engaged the services of Peter O Ogbebor (the respondent), a chartered accountant, to give an expert opinion on their behalf in an action for the recovery of a debt owed to them by Union Bank of Nigeria Plc (UBN). The appellants alleged that they had agreed to pay the respondent the sum of 100,000 naira for his services. While agreeing that his services were secured for a fee, the respondent contended that the agreement was that he would be entitled to 15 per cent of the amount to be recovered in the event it was recovered. According to the respondent, it was on these terms that he agreed to assist the appellants in the recovery by giving evidence in court as an expert witness.

At the conclusion of the debt recovery proceedings, UBN eventually paid the appellants the sum of 65 million naira, for which the respondent demanded that he be paid the sum of 9.7 million naira, which was 15 per cent of the amount. The appellants contested the respondent's demand on the grounds that the money paid by UBN was by virtue of the judgment of the court. To recover his entitlement, the respondent instituted an action at the High Court of Edo State, Benin, wherein he sought, among other reliefs, his 15 per cent entitlement and other ancillary reliefs. At the end of trial, the Court found in favour of the respondent and ordered the appellants to pay the respondent his 15 per cent entitlement. The Court further awarded the sum of 30,000 naira to the respondent as costs and 5 per cent interest on his entitlement calculated over a period. Aggrieved by this decision, the appellants appealed to the Court of Appeal, Benin Judicial Division.

Among the issues determined by the Court of Appeal was whether the respondent's action was competent and maintainable at law – in other words, whether the agreement the appellants had with the respondent was champertous.

The appellants argued that the respondent was not entitled to the sum claimed by him under the agreement he had with the appellants because the agreement was champertous. As such, it was against public policy for the respondent to seek to recover a percentage of proceeds of litigation in which he testified as a witness. In response, the respondent argued that the facts and circumstances of the case did not constitute or fall within the purview of a champertous agreement, as he (the respondent) acted within the scope of operation of his profession (as a chartered accountant) to recover debt for the appellants. He further argued that champerty applies to a situation where a lawyer maintains an action for account without fees, hoping to recover his fees from the proceeds of the trial, if successful, but that the respondent, not being a legal practitioner, acted as a chartered accountant and within the purview of the ethics of his own profession. In sum, the respondent maintained that what he did was consultancy and not champerty.

The Court of Appeal resolved the issue in favour of the respondent. In arriving at its decision, the Court noted that the appellants' assertion that they merely wanted the respondent as an expert witness does not change the character of the case presented by the respondent, who had proved that he was engaged to recover the debt and not only to testify as a witness.

In considering whether the agreement between the parties amounted to champerty, the Court of Appeal held that it is settled law that a situation where a person elects to maintain and bear the costs of an action for another to share the proceeds of the action or suit is champertous. However, it expressed the view that the determination of whether a relationship is champertous or contrary to public policy is to be ascertained not on the basis of averments in the statement of defence, but on the basis of the assertions in the statement of claim, upon which facts the plaintiff founded his action. The Court further held that:

[I]n order for the action of the respondent to be champertous, the facts have to show that the respondent offered to maintain the action by bearing the costs of the litigation in order to be given a share of the proceeds.

According to the Court, the facts of this matter did not disclose that the respondent was maintaining the action with a view to getting proceeds of the action in payment.

From the statements above, it is apparent that for a contingency fee arrangement to be champertous there has to be some element of maintenance. This implies that a third party funding of litigation may not be champertous if the third party merely 'bears the cost of an action for another' without any intention of benefiting from the suit by way of sharing the proceeds of the action.

It is presumable that third party litigation funding is not limited to funding of claims or defences, but may include financing a counterclaim in an already instituted action. This implies that the services of a third party litigation funder are not limited to financing a claimant alone, but may also benefit a defender in deserving circumstances.

From the above, it is apparent that the practice and law of third party funding of litigation and arbitration has yet to develop in Nigeria. Unlike in other jurisdictions where there are recognised funding institutions or associations of litigation funders, there is neither a formal judicial pronouncement in favour of third party funding of litigation nor any organisation of third party litigation funders recognised by Nigerian law. Rather, what exists in Nigeria is an ad hoc, underground industry of third party litigation financers that is neither recognised nor regulated by Nigerian law.


There is no special statutory or case law requirement for structuring a third party litigation funding agreement in Nigeria. Thus, it depends on the circumstances of each case. As with all other commercial contracts under Nigerian law, parties to the third party litigation funding agreement would set the terms that govern their commercial relationship. It is unlikely that the Nigerian courts will intervene when a party complains of a bad bargain, as long as the parties' relationship or transaction is legal and all ingredients for the formation of a contract are present. In these matters, Nigerian courts adopt the freedom-of-contract approach, to match the mercantilist nature of Nigerian society. It follows that Nigerian courts will enforce a third party litigation funding agreement if it clearly expresses the parties' voluntary terms of agreement and is not champertous or otherwise offensive to public policy.9

A typical funding agreement will include methods for calculating the maximum amount of money the funder will contribute to the legal representation, the percentage of the proceeds of the case that the funder will expect to receive upon success, and the maximum adverse costs award that the funder would pay, if any, in the event that the client loses the case. The agreement between the funder and the funded party may also include the funder paying the legal fees of another party or parties to the suit in the event that the funded party loses the suit, or where the judge or arbitrator orders the funded party to pay the attorney fees of another party. Clauses imposing duty of non-disclosure of confidential information released in the process of negotiation may also be inserted in the agreement, to avoid either party disclosing privileged or confidential information.

In arbitration, the party seeking third party funding may be asked by the funders to provide detailed information about the transaction. The information may be confidential or privileged under applicable law. The funder will evaluate the information to determine the strengths and weaknesses, the likelihood of success and the ability to recover from the losing party. If acceptable, the parties would negotiate a funding agreement that may cover the costs of the funded party's arbitration and the other party's attorney.10


The liability of a third party funder with respect to the award of costs depends largely on the circumstances of the case and the provisions of the third party funding agreement between the parties. Where it is found that the identity of the funder is necessary for the purposes of the payment, the funded party may be asked to disclose the identity of the funder. However, with respect to an order of court in an application for security for costs, it is doubtful whether the issue of the identity of any litigation funder may be considered by the court, as security for costs is usually either a form of bond or order to be paid into the account of the registry of the court. With that being done, the identity of the funder may not be necessary. With respect to arbitration, however, whether the identity of the funder will be disclosed will depend on the circumstances of the case.


Under Nigerian law, the issue of award of costs is discretionary. Costs are awarded at the discretion of the court but the discretion has to be exercised judicially and judiciously. Issues relating to costs are usually regulated by the rules of the court. In accordance with these rules, in fixing the amount of costs, the court or tribunal takes into account all the surrounding circumstances of the case. Thus, it is usually said that costs follow the event. The principle to be observed is that the party that is in the right is to be indemnified for the expenses borne by him or her in the proceedings, as well as compensation for his or her time and effort in coming to court.11

With respect to arbitration, the Arbitration and Conciliation Act12 provides that the arbitral tribunal shall fix the costs of arbitration in its award. The arbitration costs usually include:

  1. the fees of the arbitral tribunal;
  2. travel and other expenses incurred by the arbitrators;
  3. costs of experts' advice;
  4. administrative costs of the tribunal; and
  5. costs of legal representation of the successful party if the costs were claimed during the arbitral process, and only to the extent that the arbitral tribunal determines that the amount of the costs is reasonable.

The fees of the arbitral tribunal should be reasonable, taking into account the amount in dispute, the complexity of the subject matter, the time spent by the arbitrators and any other relevant circumstances of the case. In ad hoc arbitration, the arbitral tribunal determines the fees and in institutional arbitration the arbitral institution determines the administrative charges and the arbitrators' fees while the arbitral tribunal fixes the costs of arbitration. Fees can be based on the amount in dispute or on a daily or hourly rate.13


As indicated above, litigation involving institutions, companies and qualified legal persons does not often require funding from specialised third parties. Individuals usually bear the costs of prosecuting their claims themselves. The implication of this is that a person who cannot afford the cost of litigation or arbitration, even though he or she has a valid claim, may be denied access to court because of lack of funds. However, there are some institutions established by government that have the duty to prosecute the legal rights of indigent persons. These institutions include the Legal Aid Council set up by the federal government of Nigeria and the Office of the Public Defender set up by the Lagos state government. Also, lawyers are permitted to prosecute matters pro bono when a person is indigent and cannot afford legal fees. It appears, however, that these established institutions and the pro bono lawyers often operate in human rights abuse cases and not in commercial disputes. Moreover, these institutions are not third party funding institutions and do not benefit from the proceeds of the cases they prosecute or defend.

Nigeria is gradually moving towards recognising third party funding of litigation, although there are no recognised government or public third party funding institutions in Nigeria as this activity is not currently commercialised. Some private legal entities are springing up as third party funding institutions. One such entity is aetasLF, a private legal funding initiative focused on Nigeria.


With the enactment of the Rules of Professional Conduct for Legal Practitioners 2007, and the more flexible interpretation of champerty by the Court of Appeal in the Kessington Egbor case above, it appears that Nigerian law is slowly moving away from the rigid application of the common law doctrine of champerty and maintenance that has, over the years, made the recognition of third party funding of litigation virtually impossible. It is believed that, to grant more people access to justice, there is need for more flexibility with respect to third party funding. The existence of third party funding will create a form of equality among the parties in dispute and better access to justice for all parties. However, it has to be properly regulated to avoid abuse.


1 Justina Ibebunjo, Iheanyichukwu Dick and Pascal Ememonu are senior counsel at Uche Nwokedi & Co.

2 The 1999 Constitution of the Federal Republic of Nigeria (as amended).

3 See Oloko v. Ube (2001) 13 NWLR (Pt 729) 161 at 181.

4 Black's Law Dictionary, 6th Edition p. 231.

5 Black's Law Dictionary, 6th Edition p. 954.

6 See Oyo v. Mercantile Bank (Nig) Ltd (1989) 3 NWLR (Pt 108) 213.

7 See pages 228–230 of the report.

8 Re Trepca Mines Ltd (No. 2) (1963)1 Chapter 199 at 219.

9 The attitude of Nigerian courts in relation to contractual relationships mimics the attitude of courts in the United Kingdom, to the effect that provided that there is voluntary consent, the fairness of the parties' contract terms is a matter for the parties themselves.

10 Professor Paul Obo Idornigie. Third Party Funding of International Arbitration. A presentation at the Professorial Symposium Marking the 35th Year Anniversary: 14 March 2014.

11 See the case of Nigerian Society of Engineers v. Ozah (2015) 6 NWLR (Pt,1454) 76.

12 Cap A18, Laws of the Federation of Nigeria 2004, Section 49.

13 Professor Paul Obo Idornigie (see footnote 9).