How to finance a legal dispute?

Outmatch becomes broker in litigation funding.

We all regret the missed opportunities of strong cases that couldn’t proceed due to lack of funding, especially when the evident strategy of the opposing party was solely to exhaust financially.

This happened to us recently. Last month, we took it upon ourselves to reach out to renowned European third-party funders, as well as new players in the market, in order to establish partnerships.

In this article, we share the essence of the discussions we had with them.

What is Third-party (litigation) funding?

Third-party litigation funding involves the covering of legal expenses for one of the parties (primarily attorney fees, technical expert fees, and financial expert fees) by a third party.

To a lesser extent, the third party may also finance procedural costs to enforce a pre-existing favorable decision or even offer to purchase an unenforced favorable decision at a better price.

This practice originated in certain regions of Australia following various legislative innovations in the 1990s. It truly gained momentum from the mid-2000s in Australia (where legal fees are particularly high), and in the early 2010s in the United States and the United Kingdom.

While still somewhat elitist in France (reserved for international arbitrations and significant antitrust actions), third-party funding has nevertheless experienced rapid growth in recent years.

In Paris, investment professionals (family offices, debt funds, etc.) now mingle with specialized funds in this field.

The characteristics of TPF (high return rates, countercyclical investment) make it an ideal diversification asset for most investors.


What cases are considered?

Initially, third-party funders focused on financing enforcement proceedings in shareholder disputes, followed by commercial arbitrations and investments.

They have since expanded their activities to include class actions and private enforcement procedures (following decisions by competition authorities, financial markets, or other regulatory bodies).

While some are already specialized, most remain flexible regarding the type of litigation funded and are willing to consider a case if it is well-documented and meets their financial criteria.

Let’s move on to these financial criteria.

Firstly, third-party funders assess the ratio between (i) the funded budget and (ii) the reasonably achievable damages in the litigation. This ratio is generally around 1/10.

However, some third parties may accept financing cases based on ratios of 1/7 or even 1/5 (typically for funding enforcement of judgments and awards).

Secondly, most third-party funders require a significant minimum entry ticket in terms of the funded budget, typically around one million euros minimum.

With the entry of more traditional investors into the market, these lines are starting to shift, and investments with lower entry tickets can now be made.


How are cases selected?

Generally, internal teams of third-party funders (composed of former arbitrators, lawyers, and financial experts experienced in judicial proceedings and arbitrations) independently review all submitted cases.

However, some third parties may occasionally engage external experts to refine their investment opinions.

In any case, third-party funders consider five elements:

  • The substance of the case: Essentially examined to form an opinion on the merits of the plaintiff’s (or counterclaimant’s) case and the admissibility of their claim. Third-party funders sometimes also take interest in ensuring the ethical nature of their funding.
  • Litigation strategy: This includes reviewing the steps already taken (purpose of these steps, results obtained, capacity for self-criticism), followed by an examination of the strategy that would be implemented if funded. The retrospective phase should not be neglected, as it is often decisive in funding enforcement proceedings.
  • Advisory team: Beyond the reputation and track record of the team (especially the lead legal counsel), third-party funders examine the investment in the case and the complementarity of the team (it’s worth noting that the majority of third-party funding activities involve international arbitrations, where the lawyer-technical expert-financial expert triad is a standard).
  • Recovery prospects: Recovery prospects are assessed based on factors such as the normative time frame of the procedure, the opportunities provided by the involved jurisdiction, the enforcement and recovery routes that can be pursued (possibility of exequatur, assignment of the claim, etc.), and the financial capacity of the defendant to pay damages.
  • Budget: Finally, like any traditional investor, third-party funders assess the coherence of the budget and the allocation of funds made available.

It should be noted that France is characterized by legal ambiguity regarding TPF, and some ethical reservations still exist. This is an important point to consider when presenting a case to a foreign, particularly Anglo-Saxon, funder.

Generally, third-party funders ask the advisory team to present the case in a written note containing the aforementioned elements.

A note from the lawyer is essential; opinions from technical and financial experts are strongly recommended (some categorically refuse a case in their absence, while others condition their acceptance on holding a tender to engage such experts).

Third-party funders do not expect specific formats for written submissions and often do not explicitly demand the aforementioned criteria. This is a method of case selection.

In addition to this written submission, third-party funders naturally request exchanges with the funding applicant and their advisors.

The investment decision-making timeframe varies; it can take a few weeks (4 to 8) for the fastest funds with the most solid cases, up to a few months.

Since each third-party funder has its own decision-making process, it is difficult to give an average (feel free to contact me if you require specific information), but a three-month timeframe for a well-presented case seems reasonable.


Under what conditions?

Unless there are special cases, third-party funders bear the entire risk of their investment; meaning the funds are granted as a non-repayable advance by the applicant in the event of losing the case.

In the event of victory, a remuneration mechanism is activated. It often includes two components:

  • Primarily, remuneration by a multiple of the funded budget (often two to three times the amount) depending on the fund’s position, the action’s timeframe, and the negotiated conditions.
  • Additionally, remuneration indexed to the amount of damages obtained (often less than 5%).

Third-party funders are very flexible in their remuneration conditions and may offer a simple multiple, a combined remuneration of fixed, multiple-based, and damages-indexed parts.

Considering the upper limit, the combined remuneration could approach a multiple of four times the funded amount.

Given that this amount logically represents less than 10% of the recoverable damages, the total remuneration of the fund would not exceed 40% of the recoverable sum.

Finally, it should be noted that while third-party funders require oversight of decisions made by the advisory team, they are entirely open to abandoning a procedure for a settlement (provided that the agreement allows them to cover their costs).

Such an agreement is even preferable for them, as it reduces the procedure timeframe and allows for quicker reinvestment of funds.

In a nutshell:

Litigation financing by third parties is a tailor-made tool, whose effectiveness has been proven in the Anglo-Saxon world and is increasingly welcomed in France.

Traditional investors are now showing interest in this investment format and are beginning to expand the market, which was previously limited to major cases.

With a focus on both investors (our M&A department) and lawyers (our Disputes department), Outmatch stands at the crossroads of these two worlds that are coming together.

We have therefore launched a dedicated activity aimed at:

  • Assisting litigants (and their lawyers) in obtaining funding for their lawsuits on the best terms.
  • Assisting investors in identifying opportunities to finance or decisions to purchase.

For more information, please feel free to contact


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