Introduction to litigation funding

Most lawyers have heard of litigation funding and many have used it. But it’s still a relatively nascent field and has a lot of room for growth over the next few years. So how does it work and what are the benefits for firms and their clients?

Litigation funding is essentially the use of third party finance as a means of paying for legal action. It is most often employed in high value cases where there are multiple litigants. If the litigation is successful, a portion of any resulting award will be paid back to investors, with the aim of generating a healthy return on investment. The risk is that if the litigants lose their case, the investors lose their money.

Most litigation funding tends to focus on high value cases with potentially lucrative yields for large scale investors such as hedge funds and private equity firms. Some of the best known names in the field are Burford Capital and Therium, the latter of which has funded claims with a total value exceeding $36 billion. Bleeding edge technology is often used to assess claims by litigation funders - for example Therium recently announced a partnership with Solomonic which applies machine learning to assess the likelihood of litigation outcomes.