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Litigation Funding: A Guide to Its Transformations

21 August 2013 No Comment

canstockphoto2351419Legal funding has transformed substantially over time. What was once a mistrusted and illegal activity is now a respectable method of funding litigation. In fact, more and more businesses around the world are now turning to a third party funder for financial backing.

Why? It is no secret that litigation is expensive. Money will always be at its core because it costs money to pursue a case, whether it’s for a patent dispute or an insolvency claim. In today’s economic times, money is tight and unfortunately it doesn’t grow on trees.

However, England and Wales has experienced a surge in popularity of third party funding as a viable route to going to court. Even when money is in short supply, businesses can still achieve justice.

So how has litigation funding changed over the last five years?

  • Investment

There has been a growth in the number of third party funders. They cover all your legal fees in return for around 25%-40% of the investment, should the case win. This may sound extortionate but in reality, cases can last several years before a verdict is reached which is a long period of time to go without getting paid.

What’s more, the client doesn’t have to pay a single penny and if the case loses; they can simply walk away whereas the funder still has to pay the defendant’s legal costs.

The funding firm really is taking a huge risk by taking your case on board and as a result, most funders only accept cases that are more than £2 million in value, in order for it to be worthwhile. Up to 80% of applications for funding are refused which shows that it must have a strong probability of success.


  • Self-regulation

Reputable funding firms are accredited to the recently formed ALF (Association of Litigation Funders of England and Wales). The industry has become self-regulated and all members are bound by a strict code of practice which they must adhere to.

The rules are in place to protect the client so money doesn’t dissipate half way through a case. It also safeguards the client against excessive interference, and it stops a funder from dismissing an agreement during a trial.

It has to be noted that if a funding firm is not a member of the Association, can they really be deemed trustworthy?

  • Codes of Practice

There are many regulations and codes of practice in place to look after businesses. All solicitors are answerable to the Solicitors Regulation Authority (SRA) which means they MUST let you know of all the funding opportunities available to you.

Recently, new regulations came into force to give clients more transparency when it comes to legal costs. The Legal Aid, Sentencing and Punishment of Offenders Act (LASPO) became law on 1st April 2013 following Lord Justice Jackson’s published report in 2010. It is hoped that it will make legal costs clearer, as one of the reforms has called for better budgeting.

As you can see, litigation funding has undergone some major changes and third party funding has become a viable route to funding litigation. How else will the industry evolve? We’ll just have to wait and see!

This article was provided by Vannin Capital, a legal funding company that offers third-party commercial litigation funding.


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