Benefits of Litigation Funding. The litigation funding phenomenon, known in Anglo-Saxon jurisdictions as Third-Party Litigation Funding or TPF, has strongly developed in recent years by virtue of an increasing demand for financial solutions from companies. This demand has been particularly driven by the increase in both the number of litigation matters worldwide and the cost of litigation.
By this method, a third party finances the resources required to undertake and complete a court or arbitration proceeding, receiving a share of the proceeds in exchange, only if the litigant’s claims are upheld.
This new sector, that has been timidly introduced into Civil Law jurisdictions during the last years (specifically in the scope of our national practice, since 2015), is deeply rooted in countries such as Australia, United States, United Kingdom and Canada where the benefits of this practice have succumbed to large and small companies, as well as law firms.
The industry has evolved in recent years towards a new business model where the main reasons that lead companies to resort to litigation funding are not only limited to the lack of resources but also to the possibility of risk dispersion and optimization of companies’ resources.
In fact, going back to 2001, when the first litigation investment fund started its operations in Australia, it can be seen that the litigants who mainly used this financing tool were companies that were insolvent or lacked resources to cover the costs of litigation. However, nowadays, large and small companies do not only turn to litigation investment funds due to lack of resources, but also because of the possibility (i) of monetising their legal assets; (ii) of diversifying the risk derived from judgments or dismissal awards in complex, unpredictable and extended in time proceedings with a great economic impact; as well as (iii) of having an efficient financial tool to manage their resources.
To conclude, litigation funding is extremely useful for reasons of convenience, profitability and risk sharing in companies and at Procurator Litigation Advisors we want to help companies manage their litigation assets efficiently.
Silvia Ochoa Pérez
Legal Senior Analyst