Investment in commercial litigation finance is now global with the number of players who offer litigation financing rapidly growing, Graeme Mackenzie, Partner at TonKom and Director at Pyrenees Energy Company, and Agris Repšs, Partner and Head of the Sorainen Dispute Resolution Team, told the audience.
Litigation finance is becoming available not only in traditional common law countries (UK, US), but also in civil law countries. In Europe, Germany and Austria are the most developed in this regard. Litigating a dispute is expensive. A recent survey shows that 23% of the surveyed companies refused to pursue a claim in the court of arbitration because of costs. Litigation finance complements most other funding options which a company may have.
Today, litigation funding is used by a wide range of clients. Often it is used as a cash flow management tool. In a basic model of litigation funding a third party/funder agrees to fund legal and other costs of a legal dispute in return for a percentage of the damages and/or multiple of the funding. The funder takes the risk if the case is lost. The claimant has to pay nothing in such case. It is not a loan, there is no interest charged, and no arrangement fees need to be paid. The claimant remains in control of the case and running the case.