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The advantages of third party funding litigation

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Third party funders help to reduce the risk of litigation for corporates
Visit us today and apply for Legal Funding at http://www.woodsfordlitigationfunding.com/

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The advantages of third party funding litigation

  1. 1. Third party funders help to reduce the risk of litigation for corporates What is Litigation Funding? Litigation funding is the financing by one party of litigation brought by another in return for a percentage of any benefits received by the litigant.Visit us today and apply for funding at http://www.woodsfordlitigationfunding.com/
  2. 2. The Problem The problem with litigation is that it is a very risky business and can seriously damage a companys balance sheet. Some companies consider management of litigation to be a core competence and they dedicate significant resources to this activity. The tobacco, pharmaceutical, energy, banking and insurance sectors are well publicised examples of litigious industries, and companies in these sectors often have large in-house legal teams and significant budgets dedicated to the pursuit (and defence) of litigation.Visit us today and apply for funding at http://www.woodsfordlitigationfunding.com/
  3. 3. The Problem However, for directors of companies operating in a less litigious environment, and where significant actions are infrequent, the prospect of pursuing litigation, either as a claimant or a defendant, can be daunting; particularly given that management may lack the experience of managing such actions. Litigation can be a real pain for the Finance Director who is expected to manage the financing of what is an inherently uncertain and difficult to control expense. The English legal system is world renowned for the impartiality of its justice, but it has become one of the most expensive jurisdictions in which to resolve a dispute.Visit us today and apply for funding at http://www.woodsfordlitigationfunding.com/
  4. 4. The Solution Prior to the case of Arkin v Borchard Lines Ltd & Others in 2005, there was considerable uncertainty over the effect of the medieval laws of ‘champerty’ and ‘maintenance’, or in common parlance “buying into someone else’s lawsuit”. However in this landmark case the Court of Appeal made it clear that third party financing is a legitimate method of pursuing litigation and thus opened up the litigation funding market in the UK. In practice, litigation funding is not the ‘silver bullet’ to all litigation issues faced by companies. For example, it is usually only financially viable to fund commercial litigation where a claim is for a substantial amount and is more commonly available to a claimant rather than a defendant; however, there are funders who will finance lower value claims and also funders who will finance defendants. There are, however, significant advantages both from a commercial and accounting point of view to a party that can secure funding.Visit us today and apply for funding at http://www.woodsfordlitigationfunding.com/
  5. 5. What are the Advantages of Third Party Funding Litigation? First, and perhaps most importantly, it is possible for the funded party to lay off the financial risk of pursuing a claim, in return for giving up some of the upside. As a result of funding, the risk profile of pursuing litigation changes significantly and the short to medium-term cash flow position will be improved. Once the funder has reviewed the merits of the case and agreed to proceed, it will provide funding for some or all the plaintiff’s legal costs and also for the defendant’s costs, where the action is unsuccessful. Some funders may also require that the claimant enters into a partial conditional fee agreement with their lawyers to secure a reduction in their fees, which the lawyers only recoup if the claimant is successful, together will a success fee. This has the effect of aligning the financial interests of all the parties – claimant, lawyers and the funder.Visit us today and apply for funding at http://www.woodsfordlitigationfunding.com/
  6. 6. What are the Advantages of Third Party Funding Litigation? Second, some funders, particularly those who employ experienced litigators, are able to offer a well informed view as to the merits of the case, effectively providing a free second pair of eyes, and guidance as to which lawyers are best suited to handle the case. This can be particularly useful for companies with limited experience of litigation.Visit us today and apply for funding at http://www.woodsfordlitigationfunding.com/
  7. 7. What are the Advantages of Third Party Funding Litigation? Third, litigation funded by a third party will have a neutral impact on the financial statements of the company, whereas self-funded litigation can have a negative impact on both the P&L, cash flow and disclosures. The following example illustrates this point. For simplicity the issue of recoverability of costs in the event of success has been ignored because it is very rare for all legal costs incurred to be recovered from the other side if the case is won (just as, in the event of a loss, it is rare to pay 100% of the opposition’s costs).Visit us today and apply for Legal Funding at http://www.woodsfordlitigationfunding.com/

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