Professional third party funding by specialised litigation financing entities (Prozessfinanzierer) has existed in Germany since 1998.
These financing companies generally cover all court and statutory attorney's fees in return for a share of up to 50% of any money recovered in a successful claim. In a case where the claimant loses, the financing company will pay:
- the court costs;
- the costs of the defendant's lawyers (according to the German "loser pays" rule);
- the costs of the claimant's lawyers; and
- costs of witnesses and experts.
The purpose of such third party funding is to eliminate the risks of litigation for the funded party. As professional rules permit German lawyers to agree a success fee only in exceptional cases, third party funding of litigation provides a useful mechanism for managing litigation costs.