Third Party Litigation Funding

In Canada there are companies that provide “litigation financial services” for personal injury, class actions and many other types of claim. These “Plaintiff’s Loans” are generally up to 10% – 20% of the value of the claim. No payments of principal or interest are required until the settlement or judgment is paid. If the amount recovered is insufficient to repay the loan, some lenders hold the borrower liable for the balance. Other lenders make non-recourse loans in Canada.

The loans made by these Canadian companies are frequently to personal injury plaintiffs and in the region of $10,000 – $20,000.

In the UK there is a development towards litigation financing for bigger stakes. Investec Specialist Private Bank , a division of a financial network founded South Africa, last week announced it has become the first British bank to invest in commercial court disputes. The minimum funding is 250,000 pounds. Investec offers this service, “…in response to response to increasing demand for innovative funding solutions from law firms and their clients” according to its press release.

Parties that want to hedge their bets against costs awards if they lose, or who need financial assistance to bring a case can apply to Investec for funding in exchange for a cut of the winnings. The bank is aiming to help clients who have strong cases but are not prepared to risk the cash flow required to pursue them. The availability of litigation funding can go a long way towards bringing about a settlement.

Another firm in this line of business is Guernsey based Juridica Investments. Juridica is a source of direct financing for large business claims in the United States and one of the leading sources in the United Kingdom. Its website states,

“Our simple goal is to provide business clients with financial choices that reduce risk and assist in maximizing claim value.”

The approach is to monetize business claims and transfer the risks associated with pursuing them so they can be treated as a corporate asset.

Supporters of third party litigation funding argue it improves access to justice. If so, it is being improved at both ends of the financial spectrum.