Critics of litigation funding often cite a myriad of reasons why the practice should come under increasing regulation, claiming it lacks transparency and that funders exert control over the litigation process. However, proponents of the industry are not remaining silent in the face of these arguments, with one funder highlighting the ethical nature of third-party legal funding.
An LFJ Conversation with Michael Kelley, Partner, Parker Poe
Critics of litigation funding often cite a myriad of reasons why the practice should come under increasing regulation, claiming it lacks transparency and that funders exert control over the litigation process. However, proponents of the industry are not remaining silent in the face of these arguments, with one funder highlighting the ethical nature of third-party legal funding.
In a blog post on LinkedIn, Amicus Capital Group puts forward three core elements that establish litigation funding as a more ethical practice than other forms of lending or outside finance. Firstly, the article emphasises the non-recourse nature of the financing, which means clients are never liable to repay any costs if the case is unsuccessful. Litigation funding sets itself apart from other means of financing, as it assumes risk for cases without demanding financial return in the case of a negative outcome.
Secondly, the idea that funders are controlling litigation is a misguided one. Funding agreements are the source of capital, but they are not designed to give funders control over the legal strategy, nor any decision-making capacity over areas such as settlement negotiations.
Finally, the article reinforces the principle that funders do not jeopardize attorney-client privilege, and as has been demonstrated in recent cases, confidential information that is shared with the funder is not at risk of being made discoverable.
Amicus’ blog post draws upon previous analysis by the ABA, which covered common misconceptions about litigation funding.
