"Investing in legal aid is well worth the cost”

There is hardly any literature in the field of law and economics that focuses specifically on legal aid. Faure and Visscher fill this gap with a contribution to the special issue of Ars Aequi [in Dutch] on access to social legal aid. 

Why the administration of justice is a public good 

funds to provide legal aid to people who cannot afford it themselves, and why does the free market not resolve this problem on its own? 

The answer lies in what a court ruling brings to society as a whole. When a judge clarifies how a law should be interpreted, it benefits not only the two parties in that specific case, but also anyone who later finds themselves in a similar dispute. Furthermore, legal rules are only effective if they are actually enforced. A comparison that illustrates this clearly: right-of-way rules in traffic are not just there to determine, after the event, who is at fault in a collision. The fact that breaching them may have consequences is precisely what encourages motorists to comply with them in the first place. The same applies to legal rules in general: only if people can actually take a matter to court when a rule is breached do those rules retain their preventive, behaviour-guiding effect. 

Three market alternatives: no-win, no-fee, third-party litigation funding and legal expenses insurance 

Three market alternatives could, in theory, help, but according to Faure and Visscher, they fall short in practice. Under the ‘no cure, no pay’ arrangement, the claimant only pays the solicitor if the case is won, but this does not work if the expected return is too small, if the issue is not about money, or if the solicitor assesses the chances of success as too low; moreover, in the Netherlands, this arrangement is only permitted to a limited extent. Third-party litigation funding is permitted, but funders only get involved in large, promising commercial claims. And legal expenses insurance only covers the costs following a substantive assessment by the insurer, whilst it is precisely people on lower incomes who are least likely to take out such insurance – the very group that needs this protection the most. 

The common problem is that all these options depend on the private return on a case, whilst a case may in fact be of great value to society as a whole without the personal gain for the claimant being large enough to secure funding for it via the market. It is precisely in such cases that only publicly funded legal aid can sufficiently reduce the private costs to make the case possible after all. 

Income or public interest: which takes precedence? 

One of the most thought-provoking points in the article is the call for a more rigorous ‘public interest test’ alongside the existing means test. After all, what if someone earns just a little too much to qualify for legal aid, whilst the case itself is of great social importance – take a climate case, for example? Under the current system, such a person is often left out in the cold, on the grounds that they should have insured or financed the case themselves. 

This presents a tension that emerged during the discussion with the researchers: you might be just above the income threshold, whilst the case you are fighting for is indeed of great importance to society. Moreover, how do you determine, even before a case has been heard, exactly how great that public interest is? Faure and Visscher acknowledge that this is no simple calculation, but they stand by their basic principle: “from society’s perspective, it is more important that cases with social added value are pursued than that legal aid is strictly reserved for those on the lowest incomes.” 

More providers, more competition 

The researchers also advocate for a broad, competitive market of legal service providers. “It should not only be social legal aid organisations that are permitted to provide legal aid, but also large commercial law firms, for example through pro bono cases. More providers mean more choice for those seeking justice, and that generally improves quality.” 

The hourly rate must remain attractive 

Legal aid lawyers are reimbursed per case for a fixed, capped number of ‘allocation units’; in practice, this amounts to a sort of flat-rate hourly fee. That cap is actually set to fall in the coming years: from 250 to 225 units as of 1 January 2026, and to 200 as of 1 January 2027. Faure and Visscher warn that a rate that is too low could be counterproductive: “It is precisely the best legal aid providers who will then drop out, leaving mainly less competent providers who are trying to scrape together a minimum income in this way.” 

Investing in legal aid pays off 

“Investing in legal aid pays off, certainly in the longer term, not least because it prevents conflicts from escalating into more costly forms of dispute resolution.”  From a law and economics perspective, which focuses on increasing social welfare, legal aid therefore deserves more attention than it has received to date.