Legal disputes are expensive, which means many businesses are reluctant to go to court even if they have a valid legal claim. Previously illegal, litigation funding is used in arbitration and commercial disputes to help businesses manage risk without having to use their own capital. In recent years, there has been a rise in the use of litigation funding in the UK to enable companies to seek redress via the courts.

 

What is litigation funding?

Litigation funding involves a third party paying your legal costs in return for a percentage of the potential damages awarded should you be successful. The third party may also ask for a multiple of the total sum invested. You enter into a financial agreement that will stipulate the terms and conditions, which may include non-recourse funding whereby you only repay the funder if you win the case, reducing any financial risk. A recent report showed that litigation funding helps to strengthen consumer regulation and protection and improves access to justice.

 

Many businesses and individuals find litigation funding useful for reducing the risk of an unsuccessful outcome and for not affecting cash flow. It also allows them to pursue a claim they may not otherwise be able to afford.

 

How to secure litigation funding

If you are a company that wants to know more about litigation funding, companies such as www.novo-modo.co.uk/litigation-funding can help. It is crucial that you do due diligence by researching the potential funder to avoid a costly mistake. Once you have chosen one, they will carry out checks on your claim, evaluating the expertise of your legal team, potential damages, and merits of the case. If they agree to fund, a litigation funding agreement will be drawn up setting out all the terms and conditions.

 

The litigation is likely to be covered by after the event insurance, which protects both the third-party funder and the claimant in the event the claim is unsuccessful. Even if the claim is small, there could be potential adverse costs, especially if a funder is managing several cases.