Over the past quarter of a century, litigation financing has become a powerful tool for claimants, law firms and businesses looking for an alternative means of financing litigation. And in the last decade in particular, the financing of complex business cases has evolved and spread to jurisdictions around the world.
We are often asked: How does the funding work? How do applicants benefit from the funding arrangements? How has funding developed in key jurisdictions? To help answer these and other important financing-related questions, we’ve created a new resource page that covers the basics of litigation finance and tells the story of its development. The Litigation Finance Insights page is accessible here.
As we note in this resource, litigation funding, when distilled to its essence, “provides a means to help make the legal system more accessible on a larger scale.” The funding not only level the playing field for applicants who might otherwise not be able to pursue highly meritorious claims, but also provides an alternative solution for law firms and businesses to pursue meritorious cases. a fiscally responsible manner.
KEY QUESTIONS Litigation financing can be a complex subject, and the new page addresses many of the issues that often arise in our conversations with claimants and lawyers.
Among the topics we cover are:
- How is litigation financing defined: What does “litigation financing” mean and how does commercial litigation financing, which focuses on large cases involving businesses and individuals, differ from consumer litigation financing, which is primarily aimed at providing service? money to plaintiffs for bodily injury? Additionally, we explain the different types of financing arrangements in commercial affairs, including single case, portfolio and multi-party financing.
- The advantages of litigation financing: We explore how non-recourse financing provides an attractive alternative to traditional bank lending and provides flexibility that can allow a funded party or a lawyer to cover operational expenses, fund other emergencies, and resist a long dispute without being forced to a premature settlement. Funding can also unlock unrealized value from litigation and help improve business results.
- Financial problems. How does non-recourse financing work? How is commercial litigation financing different from a traditional loan from a financial institution? Are there typical returns? How is the risk shared between the funder, the claimant and the lawyers?
- What to expect when seeking funding. How does confidentiality work in a funding agreement? How does a funder collect information and analyze disputes? How do terminology records work? What due diligence does the funder perform? How do donors decide on investments? What is a “Litigation Funding Agreement” (LFA)? How are disputes followed up after the investment?
A HISTORY OF FINANCING We have also developed a brief history of the evolution of litigation financing, dating back to the Middle Ages. Third-party funding of lawsuits was once frowned upon because the nobles of medieval England used their wealth to unscrupulously influence litigation. As we note on our new resource page, the common law concepts of maintenance and champerty were enacted to prohibit such interference in business.
In the 1990s, in Australia, attitudes about third-party funding began to change. First, in the context of insolvency, and later, through a landmark High Court decision, in single cases and class actions, funding has become an accepted part of the litigation landscape. .
As barriers fell in Australia, funding also made inroads into other jurisdictions. On our new page, you can read more about the growth of funding in common law jurisdictions like England and Wales, and in civil law jurisdictions like Germany, the Netherlands, Switzerland and others. We also recount the rapid growth of litigation funding in the United States and Canada, and its expansion into international arbitration forums, particularly in Singapore and Hong Kong.