Litigation Funding
Unlocking Justice
Litigation funding, also known as legal funding or litigation finance, is a mechanism through which a third-party financier provides financial support to parties involved in a legal dispute in exchange for a portion of any financial recovery obtained through litigation or settlement.
- Access to Justice: Litigation funding can provide access to justice for individuals or companies who may not have the financial resources to pursue a legal claim otherwise. It levels the playing field by allowing parties with meritorious claims to pursue litigation against well-funded opponents.
- Financial Support: Litigation funding provides financial resources to cover the costs associated with pursuing a legal claim, such as legal fees, court costs, expert witness fees, and other litigation expenses.
- Non-Recourse Financing: In most cases, litigation funding is provided on a non-recourse basis, meaning that the funding is repaid only if the case is successful and results in a financial recovery. If the case is lost, the funded party typically does not owe anything to the funder, thus transferring the risk of loss to the funder.
- Risk Mitigation: Litigation can be costly and time-consuming, and there is always the risk of losing the case and bearing the financial burden of legal expenses. Litigation funding helps mitigate this risk by shifting the financial burden away from the claimant or defendant.
- Portfolio Funding: Some litigation funders offer portfolio funding, where they invest in a portfolio of legal cases rather than financing individual cases. This diversification strategy helps spread risk across multiple cases and can potentially lead to higher returns for the funder.
- Regulation: The litigation funding industry is subject to regulation in many jurisdictions to ensure transparency, fairness, and ethical standards. Regulations may vary depending on the country or region, and it's essential for both funders and litigants to understand the legal framework governing litigation funding in their jurisdiction.
Overall, litigation funding plays a crucial role in facilitating access to justice, managing litigation risk, and ensuring that meritorious legal claims can be pursued effectively.
Litigation Funding
Case Evaluation
Litigation funders typically evaluate several key criteria before deciding whether to provide funding for a legal claim. These criteria help assess the potential risks and merits of the case, as well as the likelihood of a successful outcome. Here are some common criteria considered by litigation funders:
- Merits of the Claim: Litigation funders assess the strength of the legal claim, including the underlying facts, applicable law, and legal arguments. They look for claims with a high likelihood of success based on the available evidence and legal analysis.
- Damages: Funders consider the potential damages or financial recovery that could be obtained if the case is successful. Claims with significant potential damages are more attractive for funding, as they offer the possibility of a higher return on investment.
- Costs and Expenses: Litigation funders evaluate the estimated costs and expenses associated with pursuing the claim, including legal fees, court costs, expert witness fees, and other litigation expenses. They assess whether the potential financial recovery justifies the investment in the case.
- Risk Assessment: Funders analyse various risks associated with the case, such as legal risk, evidentiary risk, procedural risk, and enforcement risk. They evaluate the likelihood of success and weigh the risks against the potential rewards of funding the case.
- Legal and Regulatory Environment: Litigation funders consider the legal and regulatory environment in which the case is being litigated, including jurisdictional factors, applicable laws, court procedures, and potential regulatory hurdles. They ensure compliance with relevant laws and regulations governing litigation funding.
- Litigation Team: Funders assess the qualifications and experience of the legal team representing the claimant or defendant. They look for reputable and experienced attorneys with a track record of success in similar cases.
- Conflict of Interest: Litigation funders evaluate potential conflicts of interest that may arise from funding the case, such as conflicts with their existing investments or relationships. They ensure that funding the case aligns with their strategic objectives and ethical standards.
- Exit Strategy: Funders consider the potential exit strategies for their investment, such as settlement negotiations, arbitration, trial verdicts, or appeals. They assess the likelihood of achieving a favourable outcome and recovering their investment with a reasonable return.
Litigation funders conduct thorough due diligence to assess the viability and potential risks of funding a legal claim. They seek opportunities that offer a strong likelihood of success and a favourable risk-return profile.
