Court fights may be time consuming, tiresome and even expensive. Next to a company having a high stake client and law firm to represent it to court or a single individual who is claiming justice, one issue still is universal and that is the expenditure of the litigation process. And here is where litigation finance comes in the picture – it gives law firms and claimants the power to take good cases forward without the complexity of initial costs.
What is Litigation Finance?
Litigation finance (accessible as legal funding or third-party funding) is where a third party who is not the party to the action funds the due process cost of a case and receives a part of the monetary recovery that may exist on a profitable outcome. In an event of the loss of the case, the funder absorbs the loss, non-recourse funding.
Who Benefits from Litigation Funding?
Law Firms
- Attract more customers and use internal budgets to the last.
- Balance the cash flow as it awaits the case adjudication.
- Increase their practice to more complex or high value cases.
Claimants
- Free of charge representation in court.
- Keep on defending and fighting despite having the economically advanced enemy.
- Never compromise in order to settle on financial pressure.
Why Law Firms Use Litigation Finance
Contingency or deferred law firms are exposed to financial risks that firms that use other fee structures are not. With litigation funding, they assist:
- Pay overhead court fees, research expenses, and the use of expert witnesses.
- Fund various cases at the same time.
- Concentrate on making rock solid arguments and not on being sensitive about straining the capital.
Why Claimants Seek Litigation Funding
A lot of people or organizations are not eager to take a justified legal action because of the lack of finances. With litigation finance, they have force to:
- Get good legal attorneys.
- Peace and Quiet, Continue on normal Business/ Life Operations.
- Get fair compensation and get out of being forced into a low offer.
Types of Cases That Qualify
Litigation finance can be utilized by:
- Breach of contract situations
- Copyright and patent violation
- Class actions lawsuits
- Investor/shareholder conflicts
- Investor or shareholder disputes
- Construction claims
- Arbitration proceedings
How the Process Works
- Application
They provide a case summary and documentation to the law firm or by the claimant. - Due Diligence
The funding team looks at the merits, risks and recovery potential of the case. - Funding Agreement
After that a contract is drafted outlining the funding terms. - Support Begins
The money is availed to meet legal expenses, disbursements or even working capital. - Case Resolution
In case of a successful case, a funder would receive an agreed amount of a return. Otherwise, then claimant/ law firm owes nothing.
Advantages of Litigation Finance
- Access to Justice: Tevens the playing ground between defenses with plenty of finances and low-resource claimants.
- Risk Sharing: Those who finance it take up the risk of litigation.
- Enhanced Cash Flow: Companies will not be required to pay the expenses upfront.
- Discrimination against Merits: Cases are not pursued in a discriminating manner of merits against financial position.
Is It Ethical and Legal?
Yes. A variety of jurisdiction regulate and understand litigation funding. It is ethical and permissible so long as transparency is observed, there is no telling of legal strategy and terms of contract are well laid out.
How to Choose the Right Litigation Funder
When selecting a funding partner:
- Make sure they have had other similar cases.
- Make sure that they are confidential and independent.
- Seek front terminology and non-recourse facilities.
- Test their receptiveness and assistance abilities.
Future of Litigation Finance
Litigation finance has turned common, particularly in the US, UK, Australia and India jurisdictions. Not only claimants but law firms and corporates that are legal risk managers are using it more and more. The third part has been suggested to develop as multi-billion dollar industry within the next decade.
Conclusion
Whether you’re a law firm looking to support a client without straining your finances, or a claimant fighting for your rights, litigation finance can be a game-changer. It democratizes access to justice and ensures that strong cases aren’t left behind due to lack of funds.
