Third party funding: a litigation lifeline?

In brief

• How lawyers and their clients can best position themselves to apply for and negotiate third party litigation funding.

As the COVID-19 pandemic and economic fallout drain liquidity from businesses and individuals, self-financing lawsuits will become increasingly challenging. Meanwhile, the litigation finance industry, which has tended to be non-correlated to financial markets or counter-cyclical, is in a position to provide a lifeline. But with so much demand for cash, funders will become more discerning about which cases they back and will charge more for their services.

Third party funding, otherwise known as litigation funding or finance, is the loaning of capital by a fund or investment firm to cover a party’s legal costs, which is repayable (with a return) in the event of a successful claim. Put crudely; it is paying for litigation when a party has a good case but either cannot