Third-Party Legal Funding in Germany

Germany is already well-known for its robust legal system, and is a preferred venue for international and domestic arbitration. Litigation funding has been in use in Germany for more than two decades. For most of that time though, funding has been used by cash-poor clients on a single case basis. This is beginning to change as funders step up and develop new solutions to meet complex legal funding needs.

Burford Capital details the many ways in which funding can be used by companies to reduce risk and get an immediate influx of cash for a case that could take years to resolve. Third-party legal funding is typically deployed on a non-recourse basis. Essentially, the company is advanced a portion of an expected award in a meritorious case. If the case is successful, the funder is paid back for their investment, plus an agreed-upon portion of the award. If the case fails, the funder loses its investment, but the company pays nothing.

Monetizing claims may seem simple, but it actually requires extensive expertise to value claims correctly. This expertise is an essential part of successful litigation funding—if the funders aren’t valuing cases accurately, their bottom line can be adversely impacted—leading to less deployable cash to go around.

Expertise is only half the battle though. Big cases call for big investments, and not every firm is equipped to handle a large portfolio of cases, or even one very big and complex case.

The time it can take a case to completion can be long or unpredictable. Delays are common, not to mention appeals. Monetizing cases allows companies to better control cashflow. The timing of funding deployments is controlled and known beforehand. This is also true of award enforcement. The help of experienced funders can make this process worry-free for companies in exchange for a share of the recovery.