Litigation is a risk for any business. The cost of litigation can be a significant overhead whether you are pursuing or defending it.
As a pursuer, it is essentially an investment. You pay your lawyers money with a view to making a significant return from the defender. In some cases, your investment results in huge success and in others it results in no return and significant professional fees.
In recent years professional investors have seen the opportunities that exist in both litigation and it's funding and this is now widely available through private funders. The advent of funding has meant that in some areas there has been a proliferation of claims. Insolvency Practitioners in England & Wales have noticed that the availability of funding has given creditors or shareholders a renewed enthusiasm for litigation where they have been left disappointed by the outcome of the insolvency or by decisions taken by the IP.
In Scotland, litigation funding has been less popular. Litigation is cheaper in Scotland than it is south of the border (both in terms of court dues and professional fees) and so there has been less of an urgent need for funding. Regulation has also held Scotland back. Some of the areas where funders focus in England (such as class actions or damages based agreements) aren't permitted in Scotland although there are proposals to change the law in that regard.
However, Scotland is now catching up. In addition to legislative changes, lawyers are seeking to give clients more choice as to how their litigation is funded. For many clients a more traditional model is still appropriate where the risk and reward is all on them. For others, perhaps where cash flow doesn't allow for regular payments to lawyers, funding is now a real option. As ever with litigation, the decision isn't an easy one. Funders will tend to take at least 30 per cent of any damages award with that sum increasing dependent on risk. So, whether to litigate and how to fund it will continue to be a careful balancing exercise.
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