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How Litigation Funding Works

Audley Capital is a litigation finance and legal services consultancy based in London but with a global reach


Litigation Financial

Audley Capital

We have a special interest in ESG principles- giving access to justice for those that are unable to fund litigation otherwise. For example, medical negligence, housing dis-repair, construction disputes, price fixing, environmental claims, commercial disputes, and arbitration on a global scale.

We work with established litigation funders and those new to litigation finance, as an alternative asset class, many of whom have a specific interest in ESG/Social Justice principles. We have a network of introducers who provide us with deal flow, and we have close relationships with many litigation legal and Counsel specialists to take funded cases forwards.



What is litigation finance

How does it work

How does it help law firms grow

Why is it vital for social justice

Why is it of growing interest as an asset class

UK Supreme Court Decision on Litigation Funding
UK Supreme Court Decision on Litigation Funding (July 26th 2023)
In an unexpected ruling issued on 26 July 2023, the UK Supreme Court has decided that Litigation Funding Agreements (“LFAs”) that take the form of a damages-based agreement (“DBA”) are unenforceable.
This shock ruling, made in the context of competition proceedings, could have profound and long-lasting implications for the UK litigation funding industry and for public access to justice.
The Judgment in R (on the application of PACCAR Inc and others) v Competition Appeal Tribunal and others [2023] UKSC 28 concerned an application to bring collective proceedings for breaches of competition law under section 49B of the Competition Act 1998. In order to obtain a collective proceedings order from the Competition Appeal Tribunal (“CAT”), the second and third respondents had to show that they had adequate funding arrangements in place to meet their own costs and any adverse costs orders.
These parties had obtained funding from certain third-party litigation funders. Under the relevant LFAs, the funders’ maximum remuneration was calculated by reference to a percentage of the damages ultimately recovered in the litigation.
The respondents contended that the relevant LFAs were not DBAs within the meaning of the relevant legislative provision (section 58AA of the Courts and Legal Services Act 1990 as amended) and were, accordingly, lawful and effective funding arrangements.
The appellants, who are truck manufacturers and defendants in the CAT proceedings, maintained that the LFAs were DBAs within the meaning of section 58AA.
In determining the matter as a preliminary issue, the CAT held that the LFAs were not DBAs within the meaning of section 58AA. The tribunal found that they were lawful and enforceable funding arrangements that could justify the making of the collective proceedings orders sought.
On appeal by way of leap-frog procedure to the Supreme Court, the question for determination was whether this form of arrangement for the funding of litigation by third-party funders is lawful and effective. Specifically, the issue was whether LFAs, pursuant to which the funder is entitled to recover a percentage of any damages recovered, constitute DBAs within the relevant statutory scheme of regulation.
This analysis depended on whether litigation funding fell within an express definition of “claims management services” in the applicable legislation, which includes the “provision of financial service or assistance”. If the LFAs at issue were DBAs within the meaning of the relevant legislation, they would be unenforceable and unlawful since they did not comply with the formal requirements for such agreements.
The Court observed that the effectiveness of group litigation may depend on the use of third-party funding and also noted that third-party funding arrangements where the funder can take a share of the compensation recovered in the proceedings have proved to be an attractive and effective model in the UK and other jurisdictions.
The implications of the issue in the appeal are significant. The Court was told that if LFAs of this kind were held to be DFAs within the meaning of section 58AA, the likely practical consequence would be that most third-party LFAs would be unenforceable as the law currently stands.
In a Judgment delivered by Lord Sales, with Lady Rose dissenting, the Supreme Court (Lords Reed, Sales, Leggatt, Stephens and Lady Rose) decided that the LFAs at issue were DBAs for the purposes of section 58AA. They were therefore unenforceable and unlawful.
Significantly, the Court’s view was that the services provided by the funders constituted “claims management services” pursuant to section 4 of the Compensation Act 2006 and section 419A of the Financial Services and Markets Act 2000 by virtue of providing “other services in relation to the making of a claim” in the form of “the provision of financial services or assistance”.
The Court observed that participants in the third-party funding market may have made the assumption that this form of LFA did not constitute a DBA but that this did not justify the Court in changing the meaning of “claims management services” as defined.
According to the current Chair of the Association of Litigation Funders, who provided a witness statement in the case, the consequences of this decision will extend to all or most litigation funding agreements and will likely be massively damaging for the administration of justice and future access to justice of parties who would otherwise have employed LFAs to fund their cases. It could bring to an abrupt end hundreds of funded claims with potentially catastrophic consequences for all involved in the case. With over £500 million of costs incurred annually by litigation funders in the UK alone, the financial consequences are enormous.
If you require further information or advice on this, please contact us at info@audleycapital.co.uk
How Litigation Funding works?
Litigation funding, also known as legal funding or litigation finance, is a process where a third-party funding company provides financial assistance to individuals or businesses involved in a legal dispute. This funding arrangement allows plaintiffs to pursue their legal claims without incurring the upfront costs typically associated with litigation. Here’s how litigation funding generally works:
  1. Evaluation: The plaintiff or their attorney approaches a litigation funding company and provides details about the case, including the nature of the dispute, the likelihood of success, and the potential damages or settlement amount.
  2. Due Diligence: The litigation funding company conducts its own evaluation of the case to assess its merits, potential risks, and chances of success. This may involve reviewing legal documents, consulting with experts, and analyzing the legal strategy.
  3. Funding Agreement: If the litigation funding company determines that the case has strong prospects, they may offer financial assistance. The funding agreement is then negotiated and signed between the funding company and the plaintiff, outlining the terms and conditions of the funding arrangement.
  4. Financial Assistance: Once the funding agreement is in place, the litigation funder provides the approved amount of funding to the plaintiff. The funds can be used to cover various litigation-related expenses, such as attorney fees, court costs, expert witness fees, document production, and other litigation expenses.
  5. Repayment: In most cases, litigation funding is non-recourse, meaning the plaintiff is only obligated to repay the funding if they win the case or reach a favorable settlement. If the case is unsuccessful, the plaintiff typically does not have to repay the funding. However, it’s essential to review the terms of the funding agreement carefully, as repayment obligations may vary.
  6. Settlement or Judgment: If the plaintiff succeeds in their legal claim, they receive the settlement amount or judgment awarded by the court. In such cases, the litigation funder is entitled to receive repayment as per the agreed-upon terms, which may include a predetermined share of the settlement or a multiple of the funding amount.
It’s worth noting that litigation funding is subject to various regulations and legal frameworks, which may vary across jurisdictions. Additionally, the specific terms and conditions of funding agreements can differ between litigation funding companies and cases. It’s crucial for plaintiffs to consult with legal professionals and carefully review the funding agreement before entering into any litigation funding arrangement.
Unlocking Growth: The Transformative Power of Litigation Funding for Law Firms
In the dynamic world of law, the ability to finance cases effectively is a vital factor in determining the success and growth of law firms. Litigation funding, also known as legal funding or third-party funding, has emerged as a game-changing solution for law firms seeking to expand their operations and undertake complex cases with confidence. This article explores how litigation funding can empower law firms, enabling them to grow and thrive in an increasingly competitive legal landscape.
Levelling the Playing Field
One of the significant challenges faced by law firms, especially smaller or mid-sized ones, is the financial burden associated with litigation. The costs of pursuing high-stakes cases can be astronomical, including expenses such as expert witnesses, court fees, discovery costs, and attorney fees. This financial strain often limits a firm’s ability to take on substantial cases, leaving potential growth opportunities untapped.
Litigation funding offers a transformative solution by providing law firms with the necessary capital to pursue these cases without depleting their own resources. By securing funding from external sources, law firms can level the playing field, taking on formidable opponents and complex cases that were previously beyond their financial reach. This newfound financial freedom empowers law firms to focus on providing quality legal services and winning cases, rather than being restricted by financial constraints.
Access to Top-Tier Expertise and Resources
In addition to financial support, litigation funding opens doors to a network of experienced professionals and resources. Reputable litigation funders often have extensive connections with legal experts, trial consultants, and other professionals who can bolster a law firm’s capabilities. This access to top-tier expertise can prove invaluable, particularly when dealing with complex litigation matters or entering unfamiliar legal territories.
Collaborating with litigation funders also allows law firms to leverage the funder’s extensive due diligence processes. By conducting thorough assessments of cases, funders help law firms evaluate the merits and risks associated with potential litigation. This due diligence not only increases the likelihood of success but also enhances a law firm’s ability to make informed decisions regarding case selection and strategy.
Managing Risk and Enhancing Financial Stability
Litigation funding plays a crucial role in managing risk and enhancing financial stability for law firms. Pursuing litigation inherently involves uncertainties and the potential for unforeseen obstacles. In such scenarios, litigation funding acts as a protective shield, insulating law firms from the financial repercussions of an unfavorable outcome.
With litigation funding in place, law firms can offload the financial risks associated with a case onto the funder. If a case is unsuccessful, the law firm is not burdened with the costs and can allocate resources to other matters. Conversely, if the case is successful, the law firm and the funder share in the financial rewards. This risk-sharing arrangement not only mitigates the financial pressures on law firms but also allows them to allocate resources more effectively, fostering long-term growth and stability.
Expanding Market Opportunities
Litigation funding provides law firms with the means to tap into new and potentially lucrative market opportunities. By diversifying their practice areas, law firms can venture into emerging fields or handle complex, high-value cases that require significant upfront investment.
For instance, law firms specializing in class action lawsuits, intellectual property litigation, or international arbitration can leverage litigation funding to pursue cases with the potential for substantial financial returns. This ability to venture beyond traditional areas of practice can significantly enhance a law firm’s reputation, attract high-profile clients, and stimulate long-term growth.
Litigation funding has revolutionized the legal landscape by offering law firms an array of growth opportunities previously unattainable. With the financial backing and support of reputable litigation funders, law firms can take on high-stakes cases, access top-tier expertise, manage risk effectively, and expand their market reach.
Litigation Finance as part of ESG Investing?
Litigation finance, as an asset class, has gained attention in recent years as an alternative investment with the potential for attractive returns. While litigation finance is not traditionally categorized as an ESG investment, there is growing interest in aligning it with ESG principles. Here’s a discussion on the topic:
  1. Positive Social Impact: Litigation finance can be viewed as a tool to promote access to justice, particularly for individuals or smaller organizations with limited financial resources. By providing funding to parties pursuing meritorious legal claims, litigation finance can help level the playing field and support social justice objectives. ESG-focused investors may see this as a way to address systemic inequalities and promote fairness within the legal system.
  2. Environmental and Social Litigation: Litigation finance can play a role in supporting environmental and social litigation, which are often associated with ESG concerns. For example, funding can be provided to plaintiffs pursuing cases related to environmental pollution, human rights violations, labor abuses, or other ESG-related issues. By investing in litigation finance, ESG-focused investors can indirectly support legal actions that seek to hold entities accountable for their negative environmental or social impacts.
  3. Governance and Transparency: ESG principles emphasize the importance of good corporate governance and transparency. When considering investments in litigation finance, ESG-focused investors can evaluate the governance practices of litigation funders. They can assess factors such as risk management protocols, ethical standards, and alignment with international norms and guidelines. Investing in funders that prioritize strong governance and transparency can help ensure that the legal process is conducted ethically and responsibly.
  4. Risk Assessment and Due Diligence: ESG investors typically evaluate the risks associated with their investments, including potential legal, reputational, and regulatory risks. Similarly, when investing in litigation finance, they can conduct due diligence on the cases funded by the litigation finance provider. This involves assessing the legal merits of the cases, potential impact on affected communities or the environment, and alignment with ESG objectives. Rigorous risk assessment can help ensure that investments in litigation finance are consistent with ESG principles.
  5. Reporting and Accountability: ESG investing often involves reporting and accountability measures to track and measure the impact of investments. In the context of litigation finance, ESG-focused investors can encourage transparency and reporting on the outcomes of funded cases, including the social, environmental, and governance implications. This reporting can provide valuable insights into the effectiveness of litigation finance as an asset class for ESG investment and help investors gauge their impact.
It’s worth noting that the integration of litigation finance into ESG investing is still an emerging area. As the demand for ESG-aligned investments continues to grow, it’s likely that more structured frameworks and guidelines will be developed to evaluate and measure the ESG impact of litigation finance as an asset class.
The Exponential Growth of Litigation Funding as an Alternative Asset Class
Litigation funding has witnessed remarkable growth in recent years, transforming into a prominent alternative asset class sought after by investors worldwide. As a form of third-party financing for legal disputes, litigation funding offers an attractive investment opportunity with the potential for significant returns. This article delves into the factors driving the exponential growth of litigation funding as an alternative asset class and explores its benefits for investors.
Diversification and Uncorrelated Returns
Litigation funding provides investors with a unique opportunity to diversify their portfolios by adding an asset class that is largely uncorrelated with traditional financial markets. The performance of litigation investments is driven by the outcomes of individual legal cases, which are independent of economic cycles and market fluctuations. As a result, litigation funding can act as a hedge against market volatility, offering potential returns that are not tied to the performance of stocks, bonds, or real estate.
High Return Potential
One of the primary attractions of litigation funding as an alternative asset class is its potential for high returns. Successful litigation cases can yield substantial financial gains, often in the form of settlement agreements or court-awarded damages. Litigation funders typically negotiate favorable terms, such as receiving a portion of the recovered amount or a multiple of their initial investment. These potential returns, often exceeding traditional investment opportunities, have attracted a growing number of investors seeking above-average profits.
Risk Mitigation and Portfolio Protection
Litigation funding provides investors with a unique way to mitigate risk and protect their portfolios. By investing in a diverse portfolio of legal cases, investors can spread their risk across multiple claims, reducing the impact of any individual case outcome. This risk diversification approach is particularly appealing for institutional investors and high-net-worth individuals who are keen to safeguard their capital and mitigate potential losses in a volatile investment landscape.
Additionally, the “non-recourse” nature of litigation funding further shields investors from downside risk. In the event of an unsuccessful case, investors are generally not responsible for covering the legal costs or repaying the funding amount. This structure allows investors to participate in the potential upside of litigation without bearing the full financial risk, thus enhancing the attractiveness of litigation funding as an alternative asset.
Alignment of Interests and Expert Due Diligence
Litigation funders have a vested interest in the success of their investments, as they typically earn a percentage of the recovered funds. This alignment of interests between the funder and the claimant enhances the due diligence process and ensures that only strong and meritorious cases are pursued. Litigation funders conduct thorough assessments of potential claims, evaluating the likelihood of success and the potential damages or settlements involved. Their expertise in analyzing legal and financial factors helps investors make informed decisions, minimizing the risk of investing in weak or uncertain cases.
Market Maturity and Increased Awareness
The growing maturity of the litigation funding market has played a significant role in its exponential growth as an alternative asset class. As the industry has evolved, best practices, regulations, and standardized funding agreements have emerged, providing investors with greater confidence and transparency. This increased market maturity, coupled with the success stories of high-profile cases, has garnered attention and raised awareness among investors, attracting new capital to the sector.
Litigation funding has rapidly evolved into a thriving alternative asset class, offering investors the potential for high returns, diversification, risk mitigation, and alignment of interests. As investors seek non-traditional investment opportunities and look beyond traditional asset classes, litigation funding stands out as a compelling option. With the market’s continued growth, increased awareness, and a track record of successful investments, litigation funding is poised to maintain its exponential growth trajectory as an attractive alternative asset class.
Funding Emissions Claims: A Pathway to Environmental Accountability and Justice
As concerns about climate change and environmental sustainability grow, so does the need for holding accountable those responsible for harmful emissions. Emissions claims, seeking compensation for the environmental and social impacts of pollution, have gained traction in recent years. However, pursuing these claims can be financially challenging for individuals or communities affected by emissions. This is where funding emissions claims plays a vital role, enabling access to justice, promoting environmental accountability, and driving positive change. In this article, we will explore how funding emissions claims can help level the playing field and empower those seeking redress for environmental harm.
Overcoming Financial Barriers
Litigation surrounding emissions claims can be complex, time-consuming, and costly. The financial burden associated with mounting a legal battle against large corporations or industries with substantial resources often discourages affected parties from seeking justice. Funding emissions claims provides a solution to this significant barrier.
By partnering with litigation funders, individuals, communities, and organizations can access the necessary financial resources to initiate and sustain emissions claims. Litigation funders specialize in assessing the merits of claims and investing in cases with a high likelihood of success. This financial support allows claimants to engage experienced legal teams, gather evidence, and pursue legal action without incurring upfront costs. By shifting the financial risk onto the litigation funder, funding emissions claims empower affected parties to hold polluters accountable, regardless of their financial capacity.
Leveling the Playing Field
Taking on large corporations or industries in emissions claims can be an intimidating prospect. These entities often have extensive legal teams and substantial resources at their disposal, creating an unequal power dynamic. Funding emissions claims helps level the playing field, enabling claimants to access the same level of legal expertise and resources.
Litigation funders not only provide financial support but also offer strategic guidance and access to a network of experienced lawyers and experts. This collaboration ensures that claimants can mount a robust legal case and effectively challenge the opposing party. By bridging the resource gap, funding emissions claims strengthens the chances of achieving favorable outcomes and incentivizes polluters to address their environmental impact responsibly.
Encouraging Environmental Accountability
One of the critical benefits of funding emissions claims is the promotion of environmental accountability. By pursuing legal action against polluters, affected parties are sending a strong message that harmful emissions will not go unchallenged. Successful emissions claims can result in substantial financial penalties or settlements, encouraging polluters to adopt more environmentally responsible practices and invest in sustainable solutions.
Furthermore, funding emissions claims can drive systemic change by uncovering evidence of wrongdoing and raising public awareness. High-profile cases draw attention to the environmental consequences of emissions, stimulating discussions, and mobilizing public support for stronger regulations and stricter enforcement measures. This ripple effect creates a culture of accountability, compelling industries to prioritize environmental sustainability and adopt cleaner technologies.
Environmental Justice for Affected Communities
Communities disproportionately impacted by emissions, such as low-income neighborhoods and marginalized groups, often face significant barriers in seeking justice. Funding emissions claims becomes a vital tool in addressing environmental injustices and ensuring that affected communities have the resources to fight for their rights.
By providing financial support, litigation funders enable communities to pursue emissions claims without placing an undue burden on already marginalized populations. This support allows community members to advocate for their health and well-being, demanding compensation for damages, funding for environmental remediation, and measures to prevent future harm. Funding emissions claims thus empowers affected communities to actively participate in the legal process and achieve environmental justice.
Funding emissions claims represents a powerful mechanism for enabling access to justice, promoting environmental accountability, and driving positive change. By overcoming financial barriers, leveling the playing field, and encouraging environmental responsibility, this form of litigation funding empowers individuals, communities, and organizations to seek redress for environmental harm caused by
Global reach of Litigation Funding
Litigation funding, also known as third-party funding or litigation finance, is a practice where a third-party entity provides financial resources to a party involved in a legal dispute in exchange for a portion of the settlement or judgment amount. The practice of litigation funding has been growing in recent years and has gained significant global reach.
The global reach of litigation funding can be seen in various regions around the world. While it originated in common law countries such as the United States, Canada, and Australia, it has spread to many other jurisdictions, including civil law countries in Europe, Asia, and Latin America.
  1. United States: Litigation funding has a well-established presence in the United States. It is commonly used in large-scale commercial litigation and class actions. Several litigation funding companies operate in the U.S., providing financial support to plaintiffs.
  2. Europe: Litigation funding has gained popularity in many European countries. Jurisdictions such as the United Kingdom, Germany, the Netherlands, and Switzerland have seen significant growth in the litigation finance industry. The availability of funding varies across jurisdictions due to differences in legal and regulatory frameworks.
  3. Australia: Australia has been at the forefront of litigation funding, particularly in class actions. The country has a mature litigation finance market and is considered a hub for litigation funders.
  4. Canada: Litigation funding is also prevalent in Canada, particularly in commercial litigation and class actions. Several Canadian provinces have specific regulations governing the practice.
  5. Asia: Litigation funding has made inroads in various Asian countries. Singapore, Hong Kong, and South Korea have seen increasing use of litigation finance. These jurisdictions have developed regulations to facilitate the practice and attract international funders.
  6. Latin America: Litigation funding is expanding in Latin American countries such as Brazil, Argentina, and Chile. The practice is relatively new in the region, but it is gaining attention and acceptance.
It’s important to note that the availability and acceptance of litigation funding can vary by jurisdiction. Some countries have specific regulations and ethical guidelines governing the practice, while others may have limited or no regulations in place. The level of acceptance and recognition by courts also varies across jurisdictions.
Overall, the global reach of litigation funding continues to expand as the practice gains acceptance and understanding in different legal systems worldwide.
How Litigation Funding can help athletes who suffer a career ending injury
Litigation funding, also known as legal funding or lawsuit financing, is a process where a third-party company provides financial support to individuals involved in legal disputes in exchange for a portion of the eventual settlement or judgment. While litigation funding is commonly associated with personal injury or medical malpractice cases, it can potentially be used for career-ending sports injuries as well.
In the context of career-ending sports injuries, litigation funding can be particularly relevant for athletes who believe their injuries were caused by someone else’s negligence or intentional actions. These injuries can result from various circumstances, such as faulty equipment, unsafe playing conditions, or even the actions of other players.
By obtaining litigation funding, athletes can receive financial support to cover their legal expenses, including lawyer fees, court costs, and expert witness fees. This funding can help level the playing field, as it allows athletes to pursue legal action against responsible parties without the immediate burden of upfront legal costs.
It’s important to note that litigation funding is typically considered a non-recourse arrangement. This means that if the legal case is unsuccessful, the athlete is not required to repay the funding. Instead, the litigation funder absorbs the financial loss. However, if the case is successful, the litigation funder typically receives a predetermined percentage of the settlement or judgment as repayment.
To explore litigation funding options for a career-ending sports injury, it’s advisable to consult with a personal injury attorney experienced in sports-related cases. They can provide guidance on the feasibility of a claim and help navigate the legal process. Audley have funders that specialise in funding this type of claim.
Remember that laws and regulations surrounding litigation funding can vary by jurisdiction. It’s essential to consult with legal professionals who specialize in your specific jurisdiction to understand the specific rules and regulations that may apply.

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