Litigation funding is a relatively new idea that has been gaining popularity in recent years. Many people, however, view it as a rather grim sort of finance akin to a gamble.
So what is litigation funding?
When a claimant decides to bring a case to court, it is going to cost money; often large sums of money. If the claimant has a good case, but doesn’t have the money to fund it, justice may not prevail. This is because costs are only awarded at the end of a case, and if the claimant is successful in their claim.
Litigation funding therefore allows the claimant to defer payment of the fees until the end of the case, and only if the claim is successful.
So, is litigation funding a loan?
Well, in one sense, yes; but it is only repaid if the claimant wins.
Won’t this bring about lots of unwarranted claims?
Well, a claim is a claim, and justice is in the eye of the beholder. If the claimant feels aggrieved, then he, she or the company is entitled to bring a claim against their opponent.
In addition, litigation funders are only going to fund cases that have a reasonable merit of success, therefore, they will be scrutinised by counsel before being funded. This means that there must be some reasonable grounds and evidence for the claim, that the funders believe will reach a successful outcome for the claimant.
Doesn’t this skew the lawyers’ incentive to win the case?
Lawyers are going to be motivated to win the case for two simple reasons:
1) The fees are usually on a Conditional Fee Agreement (“CFA”) basis which forms the basis that fees are deferred unless the claim is successful.
2) Lawyers often include an ‘uplift’ in their fees if the case is successful, as a ‘bonus’ for winning the claim
For more information on litigation funding, visit litigationfunding.co.uk