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Funding minefield

30 November 2011

Managing Partner Magazine
November 2011

Working in the largest litigation only law firm in the UK, it's no surprise that the use of thirdparty funding is an area in which we have experience. Its growth in the UK has been steady and, used in the right cases, it can be extremely beneficial.

I am currently using third-party funding in an unfair prejudice action (section 994) on behalf of a minority shareholder in dispute with his former business partners.

I've noticed a real spike in these types of disputes recently, perhaps it's a sign of the times or reflective of an increasing trend over the past decade to incentivise and lock-in key staff by offering equity as part of their reward packages.

Previously, I'd been highly sceptical about using a third party to fund litigation. I didn't see the point of using it because of the percentage of damages or the multiple of investment that would be charged.

However, in the right cases, it can present the best option for clients.

Although third-party funding can be used across a variety of disputes, typically, strong cases where significant inequalities in financial strength and resources exist lend themselves to third-party funding.

These often involve entrepreneurial companies at a relatively early stage in their development and often have an employment angle.
Litigation funding, in tandem with ATE insurance, can also be an incredibly useful tool for applying leverage to settle a case and so I expect this will lead to more widespread use over time.

The credibility of a case, given the due diligence funders will do on the merits, is also significantly bolstered by funding.

These people really are putting their money where their mouths are.

To read the full article please click on the pdf below.

This article was first published in Managing Partner on 20th October 2011 and is reproduced by kind permission (www.mpmagazine.com)

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