A litigation financing firm is like manna from heaven for less wealthy litigants.
Not all plaintiffs have bottomless financial resources, after all. And the financial backing they provide enables everyone to have equal access to the legal system.
Also known as a litigation funding firm, they help plaintiffs pay for the cost of litigation, which rarely comes cheap. The expenses even grow exponentially when a case is dragged on for a very long time.
A Quick Overview
In litigation financing, there are 3 parties involved – plaintiffs, investors, and lawyers and law firms.
- Plaintiffs can be individuals or companies facing commercial lawsuits.
- Investors refer to the litigation financing firm, such as Bentham IMF, which provide funding in exchange for a percentage of any financial recovery from the lawsuit.
- Lawyers and law firms handle the evaluation process, serve as custodians of funds, and provide investors information about the lawsuit and claims.
The entire process is pretty straightforward. But the legal system is complicated which often results in confusion. One thing is certain, however, is that litigation funding removes wealthy defendants’ unfair advantage out of the equation, encouraging settlement in the process.
To say that litigation financing has now become a critical tool for equalising access to the justice system is an understatement. Not only does it provide financial help to those who need it, but also improves the legal system by filtering out cases that are frivolous or lack economic value to investors.
This type of financing process, however, is frowned upon in some countries, such as Canada.
This is why Bentham IMF, an Australian commercial litigation financing company, was wary and reluctant to enter the country, even if they have offices in different countries including Australia and the US. This changed, however, after the 2015 Ontario case, Schenck vs. Valeant Pharmaceuticals International Inc. when the presiding judge, Justice Thomas McEwan, agreed to the arrangement that an English company will provide Reiner Schenck third-party funding. Today, Bentham “has been asked to fund 71 cases so far”, according to an investment manager in the company’s Toronto office.
The lack of access to such financial assistance would have been a major loss to individuals and companies in Canada that are in need of litigation funding. There are a number of benefits that litigation finance offers, after all.
What Litigation Funding Brings to the Table
For one, it helps undercapitalised plaintiffs to pursue meritorious cases without worrying how to pay for litigation expenses. For cases that are already filed, it can also be a source of capital in the event of funding constraints. Moreover, it allows companies to ensure their balance sheets don’t suffer due to litigation costs.
For another, it gives law firms the confidence to accept cases from plaintiffs who may not be able to afford the fees, ensuring their access to the legal system. And with many investors backing a litigation funding company, the risk of running out of money during a case is reduced. No law firm will say no to this.
To the investors, a litigation financing firm opens doors to a new asset class that lacks mutual connections to capital markets. With returns that have a history of being exceptionally large compared with other alternative types of investment assets, everyone wins with litigation funding.
Need help with funding for a litigation? Visit http://www.benthamimf.com/and find out how the company can help.