Third party financing (litigation financing)

What is the «third party financing», which also sometimes named as the “litigation financing” ? Litigation financing became last decade very popular, albeit not particularly advertised direction of the investment activity. More and more people began to see in this another’s problem the personal interest, first and foremost the financial interest. However, according to market research, even experienced lawyers often can not explain the essence of this type of financing. Our Fund is committed to show that there is nothing fundamentally new, in fact, the same principles of financing are inherent to the litigation financing, exactly same principles, as those, which are common for other investment-related operations.

What is ultimately the notion of "litigation financing"?

This term can refer to any transaction in which the financing of the judicial proceedings is made at the expense of the asset which is the subject of these proceedings. In its simplest form – the capital provider pays the bills of the law firm in exchange for a share of that asset, he can acquire only in the case of successful completion of the trial. The granted funding often able to unlock the significant assets whose use has become impossible because of the encumbrances and injunctions. For the funds providing the legal protection, such proceedings, in which they invest their own funds are considered as the ordinary asset, such as, for example, gold and silver for the investment funds, investing in precious metals. The great opportunity arises for the applicants (beneficiaries of such funding). They will be in position to unload their lists of commitments and to release their money for use in their main business. We are not even talking about such cases, where the provision of financing, like that our Fund grant, is a last hope, especially if the opposite side in proceedings is a large corporation or a wealthy and influential person. It should be noted that funding may be granted both for the companies which are parties of the trial, and for law firms, if their resources are not sufficient to continue their activities in a given process.

What is not the concept of "litigation financing "?

Legal protection funding is usually not available, when it comes to claims of a private nature - for example, if the subject of the claim is a violation of consumer rights or claim to a dentist improperly made tooth fillings, which resulted the loss of the filling on the following day after the visit. Almost always, this type of financing is provided to companies, defending in court their rights regarding the return of assets or reimbursement of the losses. Needless to say, that only meritorious claims could be financed in principle. The funds, involved in third party financing earn almost always their investment income only if they are the winning party in the process. That is why they pick up the claims very selectively. The selection is very tough. Only the proposals with the highest probability of winning have a chance to be picked up. At the end of the day the mission of any fund is the generation of the investment profit. So, it must be crystal clear for the applicants, that the funds, like ours, are just the alternative source of financing, alongside with the banking credit, attraction of the funds from the side investors or self-financing.

Types of purchased / funded claims:

  • The claims being on various stages of the judicial process;
  • The claims, subject to the consideration before they filed to the court;
  • Claims to the governments and sovereign entities
  • Claims for damage caused by crime

Types of purchased assets:

  • The rights to the return of the assets, which withdrawal may be challenged in the court (including the assets, lost due to illegal actions)
  • The assets, rights to which are challenged by the third parties

Forms of cooperation:

  • Acquisition by the Fund the right to claim with the full procedural succession;
  • The acquisition by the Fund the asset in whole or part of it;
  • Agreement on co-financing of legal protection and judicial fees;
  • Providing funding in exchange for a share in an asset, or for other associated rights;
  • Transactions under the condition.