Litigation funding: when it pays off

Many justified claims are never pursued because the cost risk is too great in relation to available liquidity. Litigation funding addresses exactly that point.

The model

A funder covers the costs of the proceedings – your own representation, court fees, experts, and, if you lose, the reimbursement of the other side's costs as well. If the case succeeds, the funder receives an agreed share of the proceeds, usually staggered according to the amount in dispute and the duration of proceedings. If the claim fails, the funder bears the risk.

When it fits

This is worth considering above all for higher amounts in dispute, with a robust evidential basis and a solvent opposing party. For smaller proceedings, the effort of the assessment is out of all proportion. It always remains the priority to clarify first whether legal expenses insurance provides cover – cover takes precedence over funding.

What to look out for in the agreement

Four points: the level and staggering of the share; the funder's termination rights during the proceedings; its say in any settlement; and the question of who actually controls the proceedings. Conduct of the litigation must remain with the client and their representation. Anyone who clarifies these points in advance avoids the conflict that otherwise regularly arises exactly when a settlement offer is on the table.