Litigation Finance

01/09/2024

A third-party financer provides a claimant with the financial means needed to challenge the claimant’s issues before a judicial forum or an arbitration tribunal. The financer receives a defined percentage of the monetary relief that the claimant obtains as a result of the legal or settlement procedure, which serves as the financer’s return on investment.

A non-recourse litigation financing agreement means that the claimant is only required to pay the financer the agreed-upon amount when they receive actual monetary relief as a result of pursuing the dispute.

A dispute arises concerning the purchase agreement and the bigger corporation repudiates the agreement and refuses to give back the money already paid by the smaller company. If the smaller company did not have the financial resources to contest long-stretched litigation, it will be forced to accept the sub-par settlement offer.

A typical litigation financing arrangement entails the financer performing an exhaustive due diligence exercise before deciding to fund a specific lawsuit.

The diligence process comprises both parties to the dispute performing legal, financial, and operational due diligence to assess the claims’ viability and the other party’s financial ability to pay the required amount. A non-disclosure agreement signed by the claimant and the financer at the outset guarantees that any information shared with the financer remains private.

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