Litigation funding has grown tremendously over the years. It has gained immense popularity across the globe, with more people and agencies embracing it. As a result, this industry has slowly turned into a multi-million-dollar industry internationally. Most developed countries have embraced it, which explains why it is not surprising in countries such as the U.S, Canada, and Australia. Canada is leading in litigation funding, a practice that has seen increased justice for plaintiffs. But how does it all work? Keep reading to uncover more details.
Benefits of Litigation Funding
With the widespread litigation funding, it is not surprising that companies such as Level Esq and other companies have tossed themselves entirely into this practice. It is very instrumental for several commercial matters. The benefits range from economic and strategic to lawyers and plaintiffs alike.
Access to Justice
This is majorly beneficial to the plaintiff. It is easier for them to access justice even when they cannot pay for litigation. It is also crucial for people who may be facing insolvency. Such funding is more critical for people or companies that could be facing giant opponents in court.
Usually, such well-resourced companies tend to take over the case, leading to the minor plaintiff being drained financially as the case is dragged on for too long. In the end, their appetite to seek justice is often quenched, and they often end up dropping a case they had an advantage of winning simply because it is no longer financially viable.
This doesn’t have to be the case when the company/ person/ lawyer in question partners with an established funder. Doing so levels the playing field and counters the imbalance that existed before. Therefore, cases will take the direction that is merited only.
Helps Sharing the Risk
Some people, lawyers, and plaintiffs alike take advantage of litigation funding to share the risk of litigation. It is a means of spreading the contingent liabilities and costs with a third party instead of soldering them independently.
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General counsels and chief financial offers continue to appreciate the accounting and budget gains that come with this third-party funding. Usually, it is one of the easiest ways to shift the litigation expenses away from the company’s balance sheets.
Offers Better Settlement
For some reason, litigation funding attracts better settlements than any other arrangement in specific scenarios. This is attributed to claim holders having several strategic options available to them and their counsel.
As such, they are not limited to the bare minimum. When one knows they have the financial backing to pursue better options, they can provide their clients with better dispute resolution. Such attorneys will not be forced to accept the lowest offer on the table because they have the means to pursue the case to the highest level and get the best outcome for their clients. The possibility of setting for lower offers due to the risk involved is eliminated.
Protection from Funder Involvement
The attorney can use the involvement of the funder to their advantage. When and if they deem it fit, they can introduce the aspect of a well-respected funder having joined in with the plaintiff’s case because they believe in the case’s merit. Such information can work to the plaintiff’s and lawyer’s advantage since most funders are well known to support only cases likely to be potential wins/ successes.
Funders are Passive Investors
You can rest easy if you are worried about the funder being actively involved. In most cases, the funder is a passive investor with no control over the matter. While some of the funders benefit from the plaintiff’s case because of their legal expertise, all the decisions regarding the case rest solely with the attorney and clients. This independence and detachment are essential, especially when the courts review the funding agreements’ appropriateness.
The Ontario Trial Lawyers’ Association has developed a policy standard that guides the interactions of litigation financiers/ funders. This apes the UK’s Code of Conduct promulgated by the Association of Litigation Funders. Most reputable litigation funders in Canada align with this.
Different Potential Forms Litigation Funding Takes
Many attorneys are familiar with litigation funding, where a third party unrelated to the litigation agrees to fund the plaintiff’s cost of litigation either partly or wholly. This fund can come in the form of attorney’s fees or/and payment of other expert fees. It is also possible for the funder to compensate the plaintiff or lawyer against potential risks through the litigation cost.
The funder can also provide compensation by buying an after-event insurance policy. Such funding arrangements are non-recourse, which means that they are non-refundable/repayable in case the case does not turn out as expected and the plaintiff/funded lawyer loses.
Besides offering non-recourse funding that caters to all costs associated with the case, the funder can also be advanced to the plaintiff concerning their portfolio of claims. This arrangement reduces the risk for the funder, and the rate of funding to the plaintiff is also fair.
The increase in contingency funding in Canada pushes law firms to seek alternative funding since it is becoming unbearable to do so from their coffers. This has seen the growth of litigation funding, an arrangement/ trend that will continue rising even in the future.
Final Thoughts
Litigation funding is beneficial to many. However, one has to understand it before getting into it fully. Litigation funding does not have to be complicated.
