What is Litigation Funding

The Legal Services Act 2007 lifted the historic ban on parties to litigation sharing the damages received in exchange for covering the legal costs.

In the context of litigation funding, investors are recommended to spread their risk across a number of individual cases, thus increasing the chances for a balanced return.

Creative Funding Solutions (Jersey) ICC (CFS) has been designed to facilitate such an investment.

Litigation Funding Market

The asset class is still in its infancy and as a result, the potential returns for investors are exceptional with there being no shortage of quality litigation cases seeking funding.

Only cases, which have sufficient damages potential to (i) cover the loan repayment and (ii) offer a reasonable return on capital for investors are attractive to litigation funders.

There are many litigants with large cases which they cannot afford to commence, let alone ultimately take to trial. The cost of instigating proceedings and obtaining specialist expert, witness evidence is more than litigants can afford to pay out of their existing resources or income. These are usually already depleted when the Claimant’s business or personal financial situation has suffered as a result of the very issue for which they now wish to sue, and which they cannot now afford to fund.

There are consequently, a significant, and growing, number of businesses in the UK, the US, Australia and Germany who are all offering litigation financing, some of which are listed on the London Stock Exchange.

Learn more

What are the Risks?

This type of case selection is clearly not an exact science and there is always the risk in litigation that you will lose the case.

Through our stringent case selection process, we are targeting a 90% success rate and in the event of a loss, through the compulsory ATE insurance, your capital is assured and any loss is confined to the return or profit you might have otherwise earned had you invested elsewhere.

As with any form of insurance there are exclusions but we are advised that with top quality lawyers, extensive due diligence and careful case monitoring, this risk is minimized.

There is a liquidity risk in that, once committed, your capital is unavailable until the case is concluded. At that time, the investor will receive either, the agreed share of the settlement or in the case of a loss, return of the original capital following a claim under the ATE insurance policy.

Insurance & Protection

Investments made to fund litigation, regardless of their size, will normally be protected by ATE Insurance cover, thereby, making such funding opportunities ‘capital protected’ and attractive to Private, Corporate and Institutional Investors as well as Family Offices. Our ATE Insurers are usually a blend of AA, A+, A and A- Rated providers in order to provide the highest quality protection to our investors.

Learn more