Nick Rowles-Davies discusses due diligence, risk & insurance in his second article on litigation funding trends
Anyone familiar with the process of litigation will recognise two things: first, it is not cheap, and second, there is no guarantee of a successful outcome. As a result, when someone is deciding whether to litigate or not they are in no small part making a decision about risk—namely, is this litigation an investment worth making, or am I throwing good money after bad?
Litigation finance is a means to alleviate both cost risk and litigation risk fears for a potential claimant. In essence, an external investor will step into the claimant’s shoes and take over a pre-agreed share of the risks. Funding arrangements thus bring claimant and financier together into a close partnership, regulated by a contract, in which risk, due diligence of that risk, and insurance against risk are tightly interlinked.
Risk
By entering into their contractual arrangement, client and funder form a consensus on several key agreements: the budget needed to fund the case; what it will be spent on; the definition of success;
