Litigation Finance is a Booming Market. Buy Why?

Litigation finance has become hugely popular in the recent years in the United Kingdom and here we take a look at the reasons behind this.

Chances are you may not have heard the term ‘litigation finance’. This model of financing litigations hardly existed outside the realms of personal injury cases at the start of this century.

By definition litigation finance or litigation funding is a practice where a third-party (financial institutions in most cases) provides capital to the plaintiff for litigation in return for a substantial portion of the final recovery. These third party financiers generally have no direct affiliation with the plaintiff, defendant or the attorneys. This funding is purely driven by lucrative courtroom opportunities and is a phenomenon on the rise.

In a legal system that is driven by spending power, it has added a completely new dimension to how legal battles are fought. For the litigation funding company, it is a means to earn a high return on investment. And for the plaintiff, it is a great way of fighting a litigation that would have otherwise had to forgo due to limited financial resources. To quote some figures:

• In the last five years, third party litigation finance has grown by almost 700%.
• In the United Kingdom £500m of investment cash is available for litigation finance, and this is growing at an exponential rate.

But why has litigation finance become a booming market?

Fight for Justice

The financially weaker litigants have often backed down and accepted petty, out of the court settlements offered by big and powerful companies. This often happens when they have been on the verge of bankruptcy, owing to long drawn out legal battles. The result, a travesty of justice. Litigation financing has come to the rescue for these individuals, they can now continue to fight long battles in the court without having to worry about becoming bankrupt.

Legal Aid Cuts

In the last few years, well the last decade to be precise, the government has substantially cut legal aid. Legal aid was granted to people to fight  housing, medical negligence, welfare and debt litigations. While at one point the government spent £2 billion annually on legal aid, a legacy that dates back to the post-war welfare state measures, it has seen drastic cuts in funding which has been widely criticized and came as a rude shock to the public. Litigation funding has filled this gap and is becoming very popular among litigants.

Empowering The Underdogs

Litigation has always been about money in the United Kingdom. When the defendant has huge financial resources and the ability to hire the best lawyers they often end up turning the tide in their favour. Many people and small businesses have a become victims due to lack of means to engage in a long drawn out litigation cases. Litigation financing has changed that and has empowered the underdogs in pursuing a legal battle against powerful groups or individuals and large corporations. This has boosted the moral of the disadvantaged and is driving them towards seeking litigation funding in their bid to seek justice and due compensation.

This explains the main driving forces behind the booming litigation funding business, it creates a win-win situation for both the litigants and the financiers. The result. A fair fight and justice for all.