There exists a widespread misconception that most litigation funders charge the same success fee. Based on our practical experience when broking third party funding for clients involved in litigation and arbitration, there are large variances between the cost of litigation funding between providers in the market.
When broking funding arrangements, we typically approach between 3-7 of the leading funders whose risk appetite most closely matches the funding opportunity at hand. Our experience is that there is very often a difference in price generated by some or all of the following:
Subjective nature of case assessment
Lawyers considering and assessing potential funding opportunities on behalf of third party funders will inevitably each have different backgrounds, skills and experiences which may influence their assessment. Whether the price is set against a matrix or formula, there is generally a degree of subjective, individual interpretation regarding some of the key elements of consideration (such as the chances of success, realistic claim value and likely stage and level of settlement).
The price offered is dependent on the source of the funder’s capital and risk appetite of the fund at the time of their funding cycle
Sometimes funders will feel more urgency to close a deal than others and will therefore price accordingly.
The price structure
This element probably produces the most significant variance. While one funder might charge the same rate as a competitor, the decision to use a multiplier against capital committed or drawn, or a percentage of proceeds (whether staged or flat) and whether to integrate caps and tranches will all have an effect on the final amount the client will pay. Depending on when the case concludes and the value of the claim, the varying structures routinely produce a delta of millions, if not tens of millions, in terms of the net cost of the funding arrangement.
To summarize, given the advanced status of the global funding market as compared to its emergence in Canada, it is vital to ensure engagement with credible and established funders as well as consider and compare the cost of multiple funding offers before entering into any litigation funding agreement.
Director of International Development
t: +44 (0) 203 882 7489
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