In a recent case involving RODCO Consultancy and Maritime Services vs. Ross, G.R. No., 259832, November 6, 2023, the Supreme Court (SC) has nullified a litigation financing arrangement between a consultancy and maritime services and a repatriated-seafarer. The repatriated-seafarer sought assistance from RODCO in filing a claim against his local manning agency, foreign shipowner, and insurance company in the NLRC after being repatriated. To facilitate this, he executed a Special Power of Attorney (SPA) and an Affidavit of Undertaking in favor of RODCO. Later, an Irrevocable Memorandum of Agreement was executed, integrating the terms agreed upon in the SPA and Affidavit of Undertaking.

Upon scrutiny, the Court found that the terms of the Irrevocable Memorandum of Agreement and its supporting documents resembled a litigation financing arrangement. Despite having no direct interest in the repatriated-seafarer's monetary claim against his former employers, RODCO agreed to finance the expenses necessary for litigation in exchange for reimbursement and a portion of the claim proceeds. It became evident that RODCO's primary intention was to profit from the litigation.

The SC deemed this arrangement akin to a champertous contract, which involves a third party financing a lawsuit in exchange for a portion of the proceeds. Such contracts are against public policy. The lack of a specific agreement regarding the amount owed to RODCO in the event of a successful claim renders it grossly disadvantageous to the repatriated-seafarer.

The Court concluded that the Irrevocable Memorandum of Agreement, along with the SPA and Affidavit of Undertaking, are void for being champertous contracts, reflecting the judiciary's stance against such arrangements.

See Full Text: https://sc.judiciary.gov.ph/.../uploads/2024/03/259832.pdf

NOTE: Under Republic Act No. 10706, enacted on November 26, 2015, it is unlawful for any person to engage in ambulance chasing, or the act of soliciting, personally or through an agent, from seafarers, or their heirs, the pursuit of any claim against them employers for the purpose of recovery of monetary claim or benefit, including legal interest, arising from accident, illness or death, in exchange of an amount or fee which shall be retained or deducted from the monetary claim or benefit granted to or awarded to the seafarers or their heirs.