Litigation funding is where a third party invests in a claim, paying for some or all of a party’s costs of bringing the claim in return for an agreed amount or share of the proceeds if the claim is successful.
Funded claims are generally run on a no-winno-fee basis: if the claim is unsuccessful, the client does not have to reimburse the funder, which simply loses its investment.
Litigation funding has come a long way in the last ten years. Historically, it was seen as very much for ‘David v Goliath’ disputes where a claimant with limited resources needed financial assistance to bring a claim against a large opponent with deep pockets.
More recently, the litigation funding market has developed and competition amongst funders has meant that the cost of funding has reduced considerably. For smaller parties, funding can even up the arms race, undermining the common defendant tactic of prolonging the litigation while running up costs in order to strong arm the claimant into a less favourable settlement. Even for wellresourced companies, litigation funding can be a useful tool, taking litigation off a company’s balance sheet and allowing it to invest in other areas of the business rather than paying ongoing legal fees to bring a claim which might not bear fruit for several years.
10 May 2020