With claims that can cost millions of dollars and cases that take years – often several years – to reach a resolution, commercial litigation has never been an inexpensive or quick activity.
Due to the current economic climate, it’s then no surprise why so many businesses are going out of their way to avoid taking cases to court, and instead trying to take care of issues and disputes without risking capital or vital cash flow.
Despite the cost, however, there will always be commercial litigation. Today, many businesses are trying to protect their own cash flow and capital assets by turning to third party funders to pay their legal fees. These businesses are not just small firms with limited capital, but FTSE 100 companies and worldwide companies.
These third party funding providers include Vannin Capital, Juridica, and Harbour – three notable and popular choices. An industry that was once illegal and regarded as hazardous is now viewed as a respectable and reliable choice for funding expensive and potentially risky commercial litigation.
Bringing a commercial case to court is an expensive process, with legal fees and the cost of lawyers to pay for. In the event that one loses a case, there’s also the cost of damages, which can add a significant amount onto the cost of any legal case.
A recent review of case funding carried out by Lord Justice Jackson, however, makes it easier for lawyers and clients to assess the costs of funding a case. With the cost of litigation now far clearer, a larger number of businesses in England and Wales are turning to litigation funding services than ever before in recent history.
In 2011, the litigation funding industry became self-regulated with the formation of the Association of Legal Funders of England and Wales. Funders are now vetted and reviewed, allowing both clients and lawyers to rest assured that funders possess a great enough amount of capital to fund their cases and are able to agree on rules to prevent them from interfering in the way a case is run.
Thanks to the self regulation of the industry, litigation funding has evolved into a far more helpful, reliable service than it once was. Claims that are unlikely to succeed in court are unlikely to receive funding, and solicitors and clients aiming for realistic claims have more confidence in their ability to pursue them.
Today’s third-party funders request between 25 and 40 per cent of the winnings of any cases that they fund. This helps to generate a return on investment for funders on successful cases – it’s worth noting, however, that funders lose their investment when cases are lost.
New laws have recently been implemented to encourage funders to stick to reliable and fair practices. The Legal Aid, Sentencing and Punishment of Offenders Act began to take effect in April 2013, making cost budgeting compulsory prior to and during a trial.
After-the-event insurance (ATI) is still an integral element of funding, and damage-based-agreements are a ‘wait and watch’ element. Despite the changes, the value of third-party litigation funding remains clear – litigants that can secure third-party funding are better equipped to take their cases to court.
This post was written by our friends at Vannin Capital, visit litigation funding today to find out more.
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.