Funding a dispute in which you have no active involvement stopped being a criminal offence in the UK in 1967, but it is only recently that funded litigation and arbitration has become more widely accepted and used. Over the past five years or so, a rich diversity of funding options now have become available in the UK.
As they become a prominent feature of the litigation landscape, it becomes more important than ever to understand what funded disputes are and how they can be utilised in an effective way.
What are funded disputes?
Funded disputes are also known as Third Party Funding (TPF) or litigation funding. They occur when a third party or funder, who has no connection to legal proceedings, invests in them. Essentially, in a funded dispute, a funder agrees to pay some or all of the legal costs associated with a claim. If the case is successful, the funder receives a share of the proceeds, based on a mutual agreement between the funder and the claimant.
So what happens if the claimant loses? If the case isn’t successful, the funder doesn’t receive anything. Nothing is owed by the litigant. Additionally, the funder doesn’t get to make any of the decisions – control of the proceedings stays completely with the claimant.
What are the benefits of funded disputes?
Funded disputes allow the Davids of the world take on the Goliaths, at least in the legal sense. Access to the courts is expensive. Not everyone has the means to support legal proceedings, even when the case is strong. TPF allows for anyone, not just those who can afford it, to pursue legal action where it is warranted. Smaller companies or less wealthy individuals who may not personally have the monies to bring their meritorious legal claims gain the opportunity to do so.
And sometimes, even Goliath needs some help. Larger, wealthier companies can also benefit from TPF – whether they lack the immediate funds or have more urgent needs for their capital, pursuing a funded dispute means their money isn’t tied up for years on end in a legal dispute.
Funded disputes make litigation a low risk enterprise, allowing the Davids to take on the Goliaths, and the Goliaths to use their capital as efficiently as possible.