LITIGATION FINANCE COMPANIES

Litigation Finance Companies 

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Litigation finance companies are becoming much more common these days, and almost mainstream businesses, as the nascent litigation funding or third-party litigation funding business model comes into its own.

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These litigation finance companies have evolved as they provide the funding or financing for client’s legal disputes against various defendants, such as other businesses, and in exchange for providing the funds, they expect a return on capital in the shape of a share of the ultimate damages won. As an example, the funder may want 2x capital returned plus 20% of the recovered damages.

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This new litigation funding business model allows potential claimants without the financial means to run their own legal case, to be able to use their asset (legal case) in partnership with a funder or other professional investors. The client gets to run their case and retain some rewards if successful, and the investors get the opportunity of making some significant gains if the case is won.

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It should be noted that many litigation finance companies provide non-recourse finance, which means if the legal case is lost, they also lose their financial investment.

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The History of Litigation Funding in the UK

Historically, litigation funding has generally been seen and viewed as quite a mysterious subject in many countries.  In the United Kingdom the early concepts of maintenance and champerty were illegal for many hundreds of years. This is when a third-party benefits from another person’s legal claim.

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During the past several decades, litigation funding has started to gain broad acceptance around the commonwealth, with countries such as the UK, Australia, Hong Kong and Singapore market leaders in this regard. There is also a strong litigation funding market throughout the US.

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The funding markets in the US and UK are very significant and are considered to be under-penetrated.

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In the UK alone, the litigation funding market has more than quadrupled since 2013 with over £2bn of investments made via litigation finance, and a conservative estimate of at least 15 litigation finance companies within the UK litigation funding market.

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The Future Expansion Of Litigation Funding

The litigation funding market is likely to continue its rapid expansion, and with that, the number of litigation finance companies will also undoubtedly increase. Some of the reasons for this are;

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Litigation funding was recommended by Lord Jackson in 2011, who formally recognised the fact that third party litigation funding enables greater access to justice for litigants and in doing so provides a “social good”.

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Litigation funding can be seen as an essential need for finance by claimants who do not have the financial backing to prosecute their claim themselves.

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Litigation funding is simply an expansion of the more traditional contingency or CFA model that lawyers have often used and are now more comfortable using and recommending to their clients.

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Litigation funding can also be used to pay for additional costs such as case investigation fees, expert fees, and also After the Event (ATE) Insurance. The premiums for ATE insurance can be very expensive and can add significantly to the total cost of litigation. Without funding to pay for this insurance, many legal cases would simply not get off the ground, as claimants could not afford to self-fund.

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Which Litigation Finance Companies Should I Consider?

With so many options of litigation finance companies now in the UK, it can be difficult to decide which ones to look at. Below we list some of the more active funders in the market for you to look at in more depth.

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LITIGATION FINANCE COMPANIES DIRECTORY

The directory below contains a selection of reputable litigation finance companies that should be considered for further discussion and due diligence if you or your client is seeking a litigation funding partner.

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