Most companies avoid filing legal claims even if they know they are on the right side because they do not have enough funds to pursue them. Good thing there is a solution to that – litigation funding.
Litigation funding is a financial arrangement in which a funder provides capital to cover the costs of litigation in exchange for a certain share of any award or settlement.
Litigation funding can be used in a wide range of cases. These include:
- commercial disputes
- intellectual property disputes
- product liability claims
- class actions
Generally, it is common in a legal claim where the stakes are high, and the litigation costs are significant.
How it Works
The process of obtaining litigation funding or litigation finance begins with a consultation with a funder.
If the litigation funders decide to fund the case, it will enter into an agreement with the litigant. This agreement will typically specify the funder’s investment amount, the funding terms, and how any proceeds from the case will be divided.
Once the funding agreement is in place, the funder will typically advance funds to the litigant to cover the costs of litigation. These costs include expert witness fees, court filing, and attorney fees.
Benefits of Litigation Funding
Here are the benefits you can enjoy if you opt for litigation financing:
Access to justice
Litigation funding can help if you lack the financial resources to pursue meritorious claims. This can help to level the playing field and ensure you have access to justice.
Reduced risk
Litigation funding can reduce the financial risk of litigation for litigants. If your case is unsuccessful, you will not personally be responsible for the costs of litigation.
Improved leverage
Defendants may be more willing to settle a case if they know that you can pursue the case to trial, thanks to the support of a litigation funder.
How to Mitigate Risks of Litigation Funding
Litigation funding is not without its risks. Some of the potential risks include:
- Funders typically charge a significant fee for their services. This means that you may end up with less money if you are successful in your case.
- Conflict of interest. Litigation funding firms have a financial incentive to see the case succeed. This could lead to a conflict of interest between you and the funder.
- Lack of transparency. The commercial litigation finance industry is relatively new and unregulated. This means there is a lack of transparency around the fees and terms funders charge.
Fortunately, here’s how you can reduce these risks.
Choose a reputable funder
Working with a funder with a good reputation and an excellent track record of success is important. You must research potential funders carefully and read reviews from other litigants.
Negotiate the terms of the funding agreement carefully
The legal financing agreement should clearly specify the funder’s investment amount, the funding terms, and how any proceeds from the case will be divided. Consider getting an attorney to review the funding agreement before signing it.
Understand the costs of litigation funding
You need to understand how much the funding will cost you upfront and how it will affect your bottom line if you are successful in your case.
Maintaining control over their case
You should maintain control over your case, even though you have a funder. This means you must have the final say on all major decisions, such as settling or going to trial.
Staying informed
Always stay informed about the progress of your case and communicate regularly with your attorney and funder.
Having a backup plan
Have a backup plan in case the case is unsuccessful. This could include having a contingency plan for paying the fees of law firms or having a source of income to fall back on.
Other things to keep in mind about litigation funding:
Litigation funding is not a loan. Funders do not expect to be repaid if the case is unsuccessful. Instead, they receive a share of any award or settlement.
Litigation funding can be used for a variety of expenses. In addition to attorneys’ fees, litigation funding can be used to cover expert witness fees, court filing fees, and other expenses associated with litigation.
Litigation funding can be complex. It is important to work with an experienced attorney to negotiate the terms of a litigation funding agreement.
Conclusion
It is important to consider the benefits and risks of fund litigation before entering into an agreement with a funder.
If you are considering commercial litigation funding, it is crucial to weigh the perks and risks carefully. Most importantly, choose a reputable funder like Omni Bridgeway. They have a highly experienced team of finance, intelligence, and law specialists with expertise in common and civil law legal and recovery systems.
Photo by Mohamed Hassan from Pixabay
