Entrepreneurs operate with some of the lowest profit margins of any industry – anecdotally, even the largest and best margins accept 2-5%. In this context, all the money spent on litigators is money that could have been invested in the growth of the company, for example, in new technologies to improve efficiency. In addition, most construction companies regularly forego revenue from good claims when trying to manage this budget and cash flow strains because the risk-return analysis does not justify the upfront costs for lawyers and advisors and the attention of their business employees. Whatever the scenario, the business reality is the same: a good debt is an unrealized asset of the company, and third-party financing is a source of capital for any company with a good debt. In particular, in line with the trend towards widespread acceptance of third-party funding as a positive influence on dispute resolution procedures, courts now consider claims for recovery of a donor`s performance fee if adverse costs are awarded to the losing party. In a recent example, a contractor was able to recover $1.7 million in third-party financing costs after winning an arbitration.1 In dismissing the application to set aside the award, the English High Court confirmed that the arbitral tribunal was entitled to award financing costs. Many people and companies with legitimate legal claims do not seek justice for reasons of cost and risk. We help by assuming the risks and costs associated with litigation and ensuring that actual claims are heard. In partnership with American Lawyer Media, Validity presents the Litigation Finance Client Experience survey, which shares the views of more than 330 U.S. lawyers on the legal finance industry. Third-party funding is now part of the discussion on construction applications, from the site office to the head office. In this article, FTI Consulting and Augusta Ventures look at some of the most common questions and perceptions, clarifying what is essentially a source of capital for any company with a good legal claim.
Today, third-party funding is a common feature of national and international dispute settlement procedures. It has become part of the mainstream because, as practiced by serious funders, it is a force for good. More importantly, it is now seen as an economically prudent risk management tool for demanding companies. Third-party financing is not suitable for every business or dispute, but the benefits are clear and you can be reasonably confident of the strength of your application once a funder has reviewed it. In good cases, third-party financing has few disadvantages. As awareness of its benefits increases, it can become common in construction disputes. As with any due diligence process, a financier requires appropriate cooperation from both the legal team and the client. However, throughout the process, a good financier will be aware of the time pressure and will know that it is important to ask only for the necessary information and quickly arrive at a result. Claims Funding International is a litigation finance company dedicated to facilitating access to justice for plaintiffs around the world. We do this by funding multi-party cases in appropriate jurisdictions around the world and working on behalf of victims of corporate misconduct, typically antitrust and securities prosecutions. Our mandate is to identify, fund, administer and resolve multi-party disputes, i.e.
cases where a significant number of claimants may be involved. Many individuals and businesses have legitimate legal claims that they do not pursue due to the financial burden and risks typically associated with litigation. The funds we provide enable victims of corporate misconduct to seek justice and redress without the risks, costs and inconvenience associated with managing the litigation itself. A third lender does not and cannot enforce the claim. Most jurisdictions have laws that prohibit a third party from controlling a legal claim. In fact, this is one of the main reasons why funders need to be rigorous: once they commit to funding a file, they cannot dictate the path it takes, who leads it, or how it is conducted. You should therefore familiarize yourself with all aspects of the case – including the legal team chosen by the client – and plan as best you can the possible paths that the claim could follow and the obstacles it could encounter. If a case does not meet the two golden rules, a funder will say no.
Commercial legal financing helps make the entire legal system fairer by providing financial resources and strategic advice to clients and law firms. If, on the basis of this initial information, the financier believes that the golden rules can be met, commercial conditions are proposed to him. Depending on the status of the case, the funder will usually need to request more information before a final decision can be made. But an established financier who specializes in construction employs highly trained construction law practitioners to ensure they only charge for what they need. Once a funding agreement is in place, the financier monitors the file like any other investment. This includes tracking, reviewing and reporting on budgetary expenditures (and, of course, paying invoices on time) and receiving regular updates on case developments. When settlement opportunities arise, the financier helps the client understand the potential business outcomes (including product distribution) and is entitled to expect an offer to be accepted if recommended by the client`s legal team. The emergence of portfolio finance has enabled Augusta to effectively meet the business needs of demanding clients by providing a more strategic “enterprise-wide” solution for their litigation costs. Consistent with this business approach, depending on the client`s preference, Augusta may also consider including in the facility an amount of working capital financing that will be used to support the applicant`s business.
