Common reasons to use litigation finance

By April 1, 2019 Uncategorized
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In the last few years, the legal world has considerably evolved. These days, hiring the services of a lawyer does not necessarily mean them billing your for their hours as they implement the strategy that they have developed, without risk being incurred to them for doing so. In part, this is due to the prolific rise in litigation funding (i.e. third party funding). What this means, in summary, is that a financier who has no direct investment in the proceedings in question helps to fund the cost of your claim and then receives a share of the winnings if you are successful in your dispute. But why would you use litigation finance in the first place? We take a look at some of the fundamental reasons why you may decide to use litigation financing or arbitration finance services.

Claims are assets

For businesses, litigation finance can be an appealing option as claims are assets. You will usually have up to six years in order to pursue them, and there is no reason for you to leave cash as a result of your business being ‘on the shelf’, when it is possible for a firm to pursue a dispute without risk or cost by using a third-party to fund your claim.

You want to use your cash elsewhere

Perhaps not being short of money is not a particular problem for your company. However, perhaps instead you would prefer to save the cash you have, in order to keep the capital for other uses in your firm. It makes perfect financial sense after all – why would you want to spend hard-earned company revenue, if a litigation funder is willing to back the claim, and you can pursue it for free?

Furthermore, a relatively small number of claims end up reaching the court room, as it tends to be the case that a favourable settlement is able to be agreed on beforehand. Nevertheless, it is important to keep in mind that this will be depend on your ability to convince the other party not just on the merits of your dispute claim, but making sure you have the financial clout in order to pursue it. If a third-party is willing to fund you, it can help to send a powerful message to others.

If your opponent has a lot of money

Alternatively, perhaps you are making a claim as an individual against a large business or cooperation. Understandably, you could be put of from spending your cash (and also the risk of losing it) by taking them to court. If you gain litigation funding, then you will not have to worry about risking your own money, nor pay anything if you end up losing your claim.

If you can’t pay to go to court

Another strong reason why you may use litigation finance is perhaps as a direct result of the claim you have made, meaning you cannot actually afford to go to court. This may be the case if you have a long-running dispute, as this can have a huge impact on your indivdiual or firm’s finance.

To reduce financial and human resources

You could also be looking at reducing the number of resources your firm uses in order to pursue your case. Litigation funding could be a good option for you if your company is looking to recover their assets, without having to run the risk of recovering assets at a cost (or with risk involved).

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Save time on paperwork and money by using litigation finance.

It can also be done for strategic purposes: perhaps you didn’t otherwise have enough management time in order to pursue a claim otherwise. Whereas in the hands of a third-party, the decision tends to be easier.

You have a number of low level claims

A potential issue you could encounter is that you a pursuing a smaller sized claim, which can at times be difficult to obtain funding for. Some litigation funders will only take on claims that have a potential win of more than ¬£5 million in total. However, if you and a number of other parties have similar or the same exact claim against a particular opponent, then litigation funding can work in your favour. This is because you are considered to have a better overall chance of being able to persuade the court they should be managed as one case. The courts refer these kinds of cases as a Group Litigation Order, but it is also commonly referred to as a ‘class action’.

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