What is Litigation Finance?

What is Litigation Finance?

In today’s complex legal landscape, pursuing justice can be time-consuming and financially draining. Litigation finance, an innovative financial solution, revolutionizes how claimants navigate the legal system. This powerful tool not only evens the odds for those who might struggle to afford expensive legal fees but also promotes fairness and equal access to justice.

For instance, a cannabis business facing legal disputes related to licensing, regulatory compliance, or intellectual property rights can utilize litigation finance to manage their case. By partnering with this Washington cannabis attorney, these businesses can ensure they have the necessary resources and legal expertise to navigate complex legal challenges. This is applicable to other businesses as well; many enterprises can benefit from litigation finance.

Litigation finance, whether in the cannabis industry or others, promotes fairness and equal access to justice. It empowers businesses to level the playing field and pursue their legal rights with confidence. This approach not only helps protect their interests but also contributes to the overall growth and legitimacy of various industries.

Understanding Litigation Finance

Litigation finance, often called litigation funding, is the process of providing financial support to claimants or law firms involved in legal claims, with the funds being secured against the potential proceeds of the case. This innovative approach allows claimants to pursue their cases without bearing the burden of upfront legal costs.

In contrast to traditional funding methods, which typically require collateral or personal guarantees, litigation finance is a non-recourse investment, with the funder’s recovery solely tied to the case’s outcome. If the claimant loses their case, they are not obligated to repay the funds in advance.

The growth of the litigation finance industry has led to the emergence of specialized litigation funding firms. These firms work closely with claimants and law firms, assessing the merits of each case before investing, with litigation costs, and ensuring that only strong claims underlying litigation with a high likelihood of success receive funding.

Is litigation finance legal?

Litigation finance is legal in most jurisdictions, with an increasing number of countries recognizing its potential to promote access to justice and support the fair resolution of disputes. However, consulting with local regulations and guidelines is essential before engaging in litigation finance arrangements.

Types of Litigation Finance

We can broadly categorize litigation and litigation finance firms into two main types: consumer and commercial. Each type serves a distinct purpose and offers unique benefits to the parties involved, depending on the nature and scale of the legal disputes.

Consumer litigation funding

Consumer litigation finance refers to the funding for individual claimants involved in smaller-scale disputes, such as personal injury or employment-related claims. This type of financing helps individuals overcome financial barriers, enabling them to access legal representation and pursue their cases.

Commercial litigation funding

Commercial litigation finance caters to businesses and corporations engaged in high-stakes legal issues such as intellectual property, contract disputes, or shareholder conflicts. This form of funding allows companies to minimize the impact of costly litigation expenses on their operations and balance sheets while still pursuing their legal rights.

Parties involved in commercial litigation finance

Several vital parties are involved in commercial litigation finance to ensure a smooth and successful funding arrangement. These parties include the claimant (business or corporation), the litigation funder, and the legal counsel representing the claimant. Each party is crucial in evaluating and managing the legal dispute regarding funding agreements. These parties work together to achieve a favorable outcome while minimizing financial risks.

How Can Businesses Use Litigation Finance?

Litigation finance enables businesses to manage litigation risks effectively. By partnering with expert litigation funding companies, companies can access tailored legal financing and solutions and maintain liquidity. This allows them to preserve capital for core operations and avoid negative impacts on their balance sheets.

Another advantage of litigation finance is unlocking value from dormant legal claims. Securing funding for these claims allows businesses to turn potential liabilities into valuable assets. This strategy generates revenue and strengthens their overall financial position.

Lastly, litigation finance levels the playing field against well-funded adversaries. Businesses can access top-tier legal counsel and resources with the backing of a reputable litigation finance firm or funder. This ensures a fair fight in pursuing justice, promoting favorable outcomes in legal disputes.

Types of Cases Litigation Funders Invest In

Litigation funders invest in diverse cases to support businesses and individuals seeking justice. The table highlights some of the most common case types that attract litigation financing.

Case TypeDescription
Intellectual PropertyDisputes involving copyrights, patents, trade secrets, and trademarks
Contract DisputesBreach of contract, misrepresentation, and other contractual disagreements
Shareholder ConflictsDisagreements between shareholders and company management or among shareholders themselves
Employment LitigationWrongful termination, discrimination, wage disputes, and other workplace issues
Antitrust and CompetitionAllegations of monopolistic practices, price-fixing, or other anti-competitive behaviors
International ArbitrationCross-border disputes resolved through international arbitration proceedings
Securities LitigationClaims related to securities fraud, insider trading, or other financial misconduct
Class ActionsLawsuits where multiple claimants join together in a federal court to pursue a common legal claim

This list provides an overview of the variety of cases that litigation funders typically invest in, offering financial support to claimants and businesses in need.

The Role of Litigation Funding Firms

A litigation funding firm works closely with claimants and their legal teams to develop a comprehensive understanding of each case. These firms determine the appropriate level of financial support needed by assessing its merits, potential damages, and overall litigation strategy.

Once the parties reach an agreement, the funder provides the necessary funds, allowing the claimant to pursue their case without worrying about the financial burden of litigation and personal expenses. Throughout the litigation process, the funder stays engaged, monitoring the case’s progress and offering strategic input when needed. In return for their investment, the funder obtains a share of the proceeds if the legal claim is successful.


Litigation finance has become a powerful tool for businesses and individuals seeking justice in an increasingly complex legal landscape. By partnering with expert litigation funding companies, claimants can effectively manage risks, unlock the potential value of legal claims, and level the playing field against well-funded adversaries.

As the lawsuit financing industry evolves, businesses must recognize and seize the opportunities that litigation finance presents, ensuring they are well-equipped to navigate and triumph in the challenging world of legal disputes.

David Robertson