What is Litigation Funding?
Litigation funding involves a third-party financing some or all of the legal expenses of one or more legal disputes in exchange for a share of the proceeds recovered from the resolution of the dispute(s).
These transactions are typically non-recourse, meaning that if there is no recovery made from the dispute, then there is no obligation to repay the funder its advances or to pay any return on its investment. It is the non-recourse nature of these arrangements that provides ‘David’ claimants with access to justice against ’Goliath’ respondents. If these claimants had to bear the economic burden of enforcing their rights, they would simply not have their day in court against well-resourced respondents. Moreover, when Goliath realises that David has a heavily capitalised funder supporting his cause, it often strengthens David’s bargaining power, and can change the tone and content of settlement discussions dramatically.
Increasingly, businesses with the means to pursue litigation are turning to third party litigation funding to reduce the risk involved inherent in any litigation, mitigate the detrimental effect of lengthy claims on cash flow and to remove litigation costs from the balance sheet.
Woodsford is a founder member of both the International Legal Finance Association and the Association of Litigation Funders.