Funded disputes are becoming increasingly popular, but many potential claimants aren’t sure whether it’s the right route for them.

There are many benefits to pursuing litigation through the funded dispute route. Here are just a few:

Litigation funding can turn a financial problem into an asset

When it comes to litigation, expenses can add up quickly – lawyers, court costs, and everything in between can make pursuing even a meritorious case expensive. And GAAP dictates that litigation costs have to be expensed through a Profit and Loss statement, unlike the costs of other financial claims which can be added to the claim and capitalised. Added to this, GAAP prohibits the recording of a litigation claim as an asset until receipt, at which point the money may be treated as outside the company’s core business. Thus, the decision to pursue litigation or arbitration can have a disproportionately adverse, short-term consequence on a business’s accounts, even if that decision is a prudent, commercial one. This particularly affects listed businesses.

When a dispute is funded by a third party, they cover front end costs and expenses , meaning that there is no need for the claimant to record those costs in its accounts. In certain circumstances, a third party funder may even monetise some of the claim, which would be immediately recorded as an asset on that business’s Profit and Loss statement. And when the dispute is over, assuming success, the business’ share of any monies awarded are pure profit, thus making a funded dispute a financial asset.

Funded disputes are for every type of business

The overarching view of litigation funding is that it allows the ‘Davids’ of the world to take on the ‘Goliaths’, at least in the legal sense. After all, not everyone has the means to support legal proceedings, even when the case is strong. Therefore, litigation funding allows for anyone, not just those who can afford it, to pursue legal action where it is warranted.

While this is true, litigation funding can be a great tool for the ‘Goliaths’ of the world as well. There is ever mounting pressure on the in-house legal budgets for many companies (particularly given the treatment of litigation costs under GAAP, as discussed above), even the larger and wealthier ones. They are looking to reduce financial output wherever they can, which is where litigation funding can come in handy. Whether they lack the immediate funds or have more urgent needs for their capital, securing funding for a dispute means money isn’t tied up for years on end.

You are always in control of the case

Do you worry that by holding the purse strings, a funder gets to make all the decisions? Think again. When it comes to funded disputes, funders can be a valuable resource, as they can provide an objective point of view about the progress of the case, they do not gain the right to make decisions relating to the claim.

The claimant and their legal team retain complete control of the claim, regardless of who is paying for the process. That means that not only do claimants gain the financial freedom/ability to pursue a claim, but they preserve the final say in how that claim is pursued.

Funded Disputes improve access to justice within the legal system

Litigation funding provides companies and individuals with bona fide claims the opportunity to seek legal redress, no matter what their financial situation. What this essentially means is that there is a greater opportunity for justice within the courts.

This is because litigation funding allows lawsuits to be decided on their merits. The high price of pursuing litigation can lead to cases being resolved inappropriately – namely, underfunded parties agreeing to settlement far below what the case is actually worth to avoid racking up legal costs. Because of this, many companies and individuals don’t pursue claims that could have a positive impact on their sector and/or the legal landscape. By taking the financial burden away, any claimant – whether they’re a wealthy corporation or a small family business – can see the legal process all the way through.

Funded disputes are a no risk option

A recurring theme with pursuing litigation is cost. There is a high cost output with no guarantee of a return. As much as you might believe in your case or the legal system, a big financial win is never a sure thing. And in the event you lose, then you could even be liable for the opposing party’s legal costs. Litigation, in other words, can involve big risks.

Litigation funding all but eliminates this risk. There are no fees for the claimant to pay, and if the case isn’t successful, the funder doesn’t receive anything. Nothing is owed by the litigant. No win, nofee , no risk – it’s as simple as that.