Litigation Finance: Empowering Corporates in Special Situations

Litigation finance is not only a powerful tool but a critical lifeline in entrepreneurial special situations. It enables companies to access the necessary funding to cover procedural costs, and potentially sell a legal claim partially or entirely in exchange for payment from specialized investors or financiers in this lucrative asset class.

Litigation finance levels the playing field for companies facing legal disputes or financial distress.

Although legal claims are often perceived as just a process, they represent a valuable asset that can provide much-needed liquidity, especially if a sound legal argument increases the likelihood of success. Furthermore, the inclusion of enforcement of claims in the financing calculation ensures that a successful ruling does not become a hollow victory.

A seasoned litigation funder brings more than just financial support. They also add pressure through sheer involvement on the opposing party to encourage an early settlement, and their enduring stamina grants reassurance that they will see the case through to its conclusion. Investment committees, usually consisting of lawyers, will assess the case's viability by evaluating relevant information.

After reviewing previous cases, I have compiled a comprehensive list of important factors to consider before approaching potential capital providers. This overview is not exhaustive but can offer valuable guidance in a structured format for mandated legal advisors or in-house counsels, outlining the required elements of supporting documentation:

Executive Summary

• Introduce your team and their distinguished legal and business expertise, highlighting their relevant experience and qualifications
• Briefly summarize the legal claim and articulate your strategic objectives and how the requested funding will support them
• Provide a compelling argument for why the legal claim is worthy of investment and how it aligns with the financier's investment goals

Legal Claim Analysis

• Provide a comprehensive and nuanced analysis of the legal claim, including its legal and factual basis and the key legal theories and arguments that support it
• Conduct a thorough review of relevant legal precedent, cases, and statutes, and discuss how they support or challenge the claim
• Address potential legal challenges or counterarguments that may arise and explain how your team is equipped to address them

Litigation Timeline

• Outline a detailed litigation timeline that demonstrates your team's deep understanding of the legal process, including key milestones, deadlines, and critical junctures
• Identify potential risks or obstacles to the litigation timeline, such as procedural hurdles or discovery disputes, and explain how your team plans to address them
• Provide a contingency plan for potential delays or unexpected developments that may arise during the litigation process

Risk Assessment

• Conduct a rigorous risk assessment of the legal claim and the likelihood of success, taking into account both legal and financial considerations
• Analyze the strengths and weaknesses of the claim and provide a clear-eyed assessment of the chances of success
• Identify potential legal, financial, and reputational risks associated with the claim and explain how your team plans to mitigate them

Financial Analysis

• Provide a detailed and well-supported financial analysis of the legal claim and the funding requested, including a thorough breakdown of the requested funding and how it will be used to advance the claim
• Discuss potential financial risks, such as contingency fee arrangements or the possibility of adverse cost awards, and explain how your team plans to manage them
• Identify potential sources of additional funding or financing that may be available to support the legal claim

Additional Considerations:

• Provide a clear and concise articulation of the legal claim that highlights its unique legal and factual merits
• Use legal and financial jargon judiciously, focusing on precision and clarity over technicality
• Provide supporting documentation, such as legal briefs, expert opinions, and statistical data, to bolster your analysis and demonstrate your team's expertise and professionalism.

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