Funding a court case can be an extremely costly affair, and when you are a business with a strong case but minimal financial ammunition, it can feel like you have no one to turn to.
Thankfully, litigation funding, or third-party funding as it is also known, could be the answer.
Although anyone is eligible for litigation funding, what makes a funder take on your case
What is a litigation funding company?
Litigation funders provide a business with the financial support needed for their court case.
This source of funding might have been recommended to a client by their solicitor, who is under an obligation to inform them about third-party funding by their professional Code of Conduct.
If a business decides to receive funding from a litigation company, they are under no obligation to pay anything up-front, and they are only expected to pay the funder if and when the case is successful.
Although litigation funding companies are self-regulated, the more credible ones are members of the Association of Litigation Funders (ALF). A respectable solicitor will point a client in the direction of funders within the ALF.
When it comes to deciding on how much the funding company is looking to recoup, it is usually dependant on the size of the case. Some may ask for a return on their investment, plus an additional 30%. Some companies may ask for three times this amount, so it’s best to do your research before approaching a funder.
Which cases will litigators fund?
According to a recent survey, at least 85% of applications for litigation funding are rejected, especially if they deem the case not to be financially worth their while.
There are generally four essential aspects of a case that need to be present to attract a litigation funder. They are:
- At least a 60% chance of success
- A strong defense
- A well-resourced defendant, who can pay the fees if they lose
- The level of rewards should be around £1million, to ensure a justifiable
But even though 85% of applications are rejected, if your case is selected, you stand a good chance of success.
Litigation funding: what does the future hold?
With law firms becoming increasingly interested in litigation funding, many are predicting that it will become part and parcel of the litigation process.
Like any other industry, there will always be companies that are less trustworthy and reliable than others. And although this method of funding is self-regulated, the ALF plays a vital role in distinguishing the good companies from the bad.
Obviously, a third-party funder will not want to be perceived as unprofessional or unreliable, as this would deter businesses and solicitors from using them.
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