Litigation finance, often referred to as legal finance or third-party litigation funding, has become an increasingly significant aspect of the legal landscape. This financial mechanism allows litigants to finance their legal costs through third-party investors or companies.
Investors or specialized firms provide capital for legal fees, expenses, or even working capital during litigation. The funding is usually repayable only if the lawsuit is successful. The funder receives a return based on a percentage of the settlement or award.
The good news is that with access to litigation finance law firms can offer to represent clients who might otherwise be turned away due to financial constraints.
The concern is regarding the ethics of litigation finance, particularly around issues like third-party influence on litigation outcomes.
The integration of litigation reshapes the business of law and encourages firms to think beyond traditional fee structures towards strategic financial engagements. However, with this shift comes challenges around ethics, transparency, and regulatory oversight, which will continue to evolve as the practice becomes more mainstream.
For law firms, litigation funding may very well lead to the ability of faster pay for legal support services, however confidentiality and potential conflicts of interest are top of mind.
eCourt Reporters is monitoring the legal funding framework as we support the concept of timely payments for legal support services.
