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Exploring Litigation Funding?

What is Litigation Funding?

Litigation funding, also known as ‘litigation finance’ or ‘third party funding’, is simply an alternative means for a claimant to fund the costs of a legal dispute, including litigation and arbitration. A third-party funder, otherwise unconnected to the dispute, usually enters into an agreement with a prospective claimant or law firm to provide funds for the claimant’s legal costs, in return for a share of the award in the event that the claim is successful. The investment by the funder is typically non-recourse, which means that if the claim is lost, the claimant is not liable to reimburse the funder’s investment. In essence, the third-party funder can shoulder the risk of the costs in a dispute, rather than the claimant.

So how is non-recourse funding different to ordinary commercial financing?

A traditional bank loan is recourse funding. It requires a borrower to repay the loan, regardless of the outcome of a dispute. Banking institutions do not have the litigation expertise to underwrite the merits of a claim, so they ask for collateral or personal guarantees—whereas litigation funders see litigation rights as an asset that can be funded without collateral support. That’s how we structure transactions as non-recourse investments.

Wild Dog Serves as a Trusted Advisor…

to attorneys and their clients, who are exploring litigation financing. Our engagements are tailored to fit the specific needs of each of our clients. We broker non-recourse transactions across an extensive network of capital sources.

The benefits of working with Wild Dog include:

1.   Independent advice
2.  Quick decision making
3.  Transparency in the negotiation process
4.  Savings from a competitive fundraising process
5.  Peace of mind from the support of recognised experts in the field

For Law Firms

Attorneys who are knowledgeable about litigation financing are able to offer their clients more alternatives for managing legal budgets, thereby facilitating engagements for their law firm and strengthening relationships with their clients. Commercial litigation funding also offers law firms tools to manage their own finances and to reduce risks.

Law firms can use litigation finance in two basic ways:

  • Help their clients secure litigation funding to accommodate clients who seek contingency fee economics
  • Obtain litigation financing directly, secured by a portfolio of the firm’s contingency litigation matters

Benefits

Litigation financing enables law firms to realize many of the benefits associated with a capacity for contingent fee litigation, such as:

  • Facilitating lucrative litigation engagements
  • Augmenting the firm’s capacity for alternative fees
  • Hedging of risks associated with contingent fees
  • Strengthening client relationships by addressing their business needs

For Business‘

Commercial litigation finance enables your business to minimize the negative financial impact of litigation. A third-party litigation funding arrangement not only serves as a source of liquidity but also affords relief from the budgetary constraints and the P&L impact associated with major litigation expenditures.

Businesses are using litigation finance to:

  • Fund fees and expenses to assert or defend legal claims
  • Leverage legal claims to generate capital for purposes unrelated to the claims
  • Monetize or sell uncollected judgments
  • Hedge against the risk of an adverse legal outcome

Benefits

Corporate litigation financing offers many of the same financial benefits to businesses as a contingent fee engagement with a law firm, such as:

  • Preserving working capital
  • Reducing budgetary pressures
  • Increasing P&L predictability
  • Mitigating litigation outcome risk
  • Expanding options for working with preferred law firm

Which Cases are Suitable for Funding?

Commercial claims which are seeking a monetary outcome or an easily-liquidated asset (such as shares or real property) from a defendant who has the ability to pay. The case must be ‘economically viable’ for funding. This means that it must have a minimum 1:10 costs to award ratio. In other words, the total budget to run the case must be no more than 1/10 of the claim value. This is to ensure that the claimant will receive a worthwhile sum from the damages after the Litigation Funders reimbursement and success fee are paid.

Claim types include, but are not limited to:

Arbitration (domestic, international and bilateral investment treaty)

  • Class Actions
  • Commercial Litigation
  • Consumer Disputes
  • Competition
  • Financial Services
  • Infrastructure and Energy
  • Intellectual Property
  • Medical Negligence 

Win-don’t lose Proposition

Regardless of the claimants size or financial resources, partnering with a litigation funder is a smart move for any litigant seeking to offset some or all of their financial risk as they take on litigation against well-resourced defendants.

Ultimately, litigation funding permits claimants to hedge some of their risk, ensuring that they will be in a better position if the claim is successful, but in no worse position if their claim is unsuccessful. Thus, funding transforms litigation from a traditional “win-lose” proposition to a “win-don’t lose” proposition, as litigation funding is provided on a non-recourse basis.