Why litigation funding makes sense
Litigation is expensive, and, with the cutbacks in legal aid, becoming further out of reach for many. Only those with plentiful capital can readily pursue claims through the courts.
Into this funding gap has stepped companies that provide litigation financing. The way it works is that the funding company underwrites the cost of the litigation, including legal fees, in return for a share of any damages awarded to the claimant at the conclusion of the trial.
For the claimant, they have the reassurance that they will be able to afford to take their case all the way through to court, if necessary. (Most cases settle before they reach court, but, in this event, the litigation funder will take a proportion of the agreed settlement figure.) For the funder, there is an opportunity for good returns on their investment in the litigation. This makes good business sense: in several jurisdictions – and particularly the US – litigation is big business.
Yet, litigation funding is not yet as widespread as it could be. There are three possible reasons for this. Firstly, because there are risks associated with litigation, it does not attract risk-averse businesses – even those with capital as their disposal. Second, there is a perception that such litigation funding as is available is focused on the higher value cases. Third, would-be claimants are deterred by the lengthy process of applying for litigation funding.
One litigation funding company, Burford, aims to address these obstacles by offering to finance all sizes of claims and by making the process of applying for litigation financing as easy as possible. Together with TheJudge, specialist advisers and brokers of ATE (After the Event) insurance and litigation funding, Burford has launched an online product, SPRINT, that makes funding possible with just one click.
As Burford says, “We know from listening to law firms and their clients that finding a solution for funding lower value cases has historically been more difficult than it should be. The process, due diligence and pricing which work for larger cases can often make a funding package for small cases impossible to achieve. SPRINT is designed to change all that by providing a simple, fast and effective solution for funding in lower value cases.”
There are straightforward criteria, including a funding requirement of between £25,000 and £500,000 per case and a damages-to-budget ratio of at least 4 to 1.
Having completed a short and simple form online, claimants will know immediately if their application has been successful. They can then have immediate access to funds. Claimants, in turn, can then get their litigation moving by paying their lawyers and knowing that disbursements will be covered.
With funding guaranteed for any litigation, all of the stress associated with receiving payment is removed at a stroke. Barristers can receive some of their fees upfront, and know they will receive the rest on completion of the case – whatever the result.