The introduction of legal financing provides suitable plaintiffs with a means of paying the cost of litigation without having to resort to traditional borrowing.

The costs of legal representation (and associated expenses) can often be substantial and even a claimant with a strong case may not have access to sufficient available financial resources to pay for successful litigation. Litigation funding allows claimants or plaintiffs to pursue legal action without needing to finance the full cost of litigation. It “levels the playing field” and enables even small businesses and individuals with limited resources to access the legal remedies that would otherwise only be available to substantial or well-funded organisations.

Litigation funding, also known as “ Legal Financing” or “Litigation Finance”, is a method of financing the expenses of litigation by which a third-party makes an advance to a claimant or plaintiff in exchange for an agreed return if the relevant case is successful. The finance is provided in the form of a non-recourse loan which is not repaid if the case is unsuccessful (“no win, no pay”).

If the case is successful, the funder receives a share of the proceeds or an agreed percentage of the initial investment; the parties enter into standard agreements that comply with industry standards, such as those set by the Association of Litigation Funders (ALF) or European Litigation Funders Association (ELFA).

The significant benefits of litigation finance mean it is increasingly used as a funding mechanism. Even substantial, well financed companies use litigation funding to optimise their financial resources, improve cash flow and/or remove legal costs from their balance sheets.