How could litigation funding work for your business?

28th March 2013

Litigation funding in England has increased in popularity by a considerable amount over the years. Some funding companies have seen incredible success, with annual litigation funds quadrupling in just one year.

These funding companies essentially pay the financial bills for companies that they have agreed to fund in court. The third party funder will provide capital up to a pre-determined sum and, if the case is successful, the client will return the initial investment and provide the company with a Return on Investment (ROI) from the damages awarded.

There is a very high level of risk involved in litigation funding, which is why the cases these companies choose to take on must have a good potential success rate. Almost 85% of applications for funding are rejected as they are too low value, or they don’t have a good chance of being successful. Generally, the value of the claim must be over £1m for a litigation funding company to take on a case.

Be smart

If you are considering litigation funding, you will need to sit down with your solicitor to figure out whether it would be worthwhile. Between 30 and 40% of the damages awarded are likely to be recouped by the funding company. This means you will probably need to fight for a higher settlement sum, which could drag the case out for an increased length of time. It’s important to remember that the longer the case goes on for, the more money the funding company will require.

However, you should also remember that, should the case be unsuccessful, you could walk away without having to reimburse the litigation funding company one bit. This security could certainly be worth taking a lower settlement amount at the end of the day.

Do your research

Once you have decided that litigation funding is definitely the way to go for you, your solicitor will be able to help you to find the right company for you. It is vital that you choose a reputable litigation funding company, preferably one which is a member of the Association of Litigation Funders (ALF), as they must follow the Code of Conduct.

Read the small print

Before agreeing to anything, ask your solicitor to take you through each and every clause in the contract between you and the litigation funding company. Make sure you understand absolutely every aspect of it so that you aren’t taken by surprise later on. The litigation funding company is not allowed to interfere with the case, but its views may carry some weight. Ensure you both see eye to eye concerning your case so that you will be able to work well together.

Litigation funding can be invaluable to big businesses seeking funding for important court cases. However, you should always seek out a reputable company that will have your best interests at heart.

This article was written by Aurora Johnson on behalf of Vannin Capital, a Litigation Funding UK company specialising in commercial cases.

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