Most people think litigation funding is only an option when they don’t have the resources available to pursue a claim.
But litigation funding is not just about access to justice – it can be a critical tool to manage and minimise risk in commercial litigation.
Here are three key reasons why you should consider litigating funding for your claim:
- Risk management
- Freeing up capital
- Independent verification of your claim
For a quick refresher as to what litigation funding is and how it works,
you can visit our previous article about the litigation funding options.
1. Risk management
The primary reason to seek litigation funding is for risk management. By transferring the cost to a funder, who will supply the resources for your litigation in exchange for a percentage of the outcome, you also transfer the uncertainty of the outcome or, the risk of losing.
Once you have these two things covered i.e. the cost of the litigation and the risk of losing, then you have effectively offset the two key uncertainties in any piece of litigation.
In doing so, you also protect yourself against adverse cost risks. This refers to the potential liability for the legal costs incurred by the opposing party if you are unsuccessful in the litigation. Adverse costs typically include legal fees, court fees, and other related expenses, and are generally mitigated against with After-the-Event (ATE) insurance.
2. Freeing up capital
Litigation funding frees up the capital that you would otherwise use to pay for your claim, allowing you to concurrently pursue other business opportunities.
In considering litigation funding, and weighing up what else you could do with that capital, it highlights the opportunity cost of pursuing litigation. This perspective helps you make an informed decision about whether and how to pursue litigation, facilitating an investment mindset rather than being clouded by the emotion of the dispute.
This kind of thinking also gives you a better perspective on the cost of litigation funding and whether it is reasonable. While there is a perception that litigation funding is expensive, this assessment cannot be made without first considering the opportunity cost.
3. Independent verification of your claim
Litigation funders are commercially minded entities and will only fund a claim where they have a reasonable expectation of achieving a return.
So, when you attempt to source litigation funding, you are effectively getting another layer of assessment of the veracity of your claim. Having an external party with skin in the game evaluate your claim adds credibility and can help you make more informed decisions.
Aptum are experts in litigation and our core function is risk management. If you are interested in tools and options to help minimise risk in your litigation strategy, reach out.
Keep Learning
Now that you have an understanding of the benefits of litigation funding, here are a few more articles to deepen your understanding of investing in litigation:
