Litigation funding (also: process cost financing ) is a legal financial services. The litigation funder assumes the necessary costs of a non-judicial or judicial pursuit of private or commercial claims.
Litigation funding was offered in 1998 by the FORIS AG for the first time in Germany professionally and is now operated by different companies, including subsidiaries of the DAS Legal expenses insurance AG and Roland legal protection insurance.
Usually requirement is a minimum amount in dispute. For the larger and better-known companies this is at least EURO 50,000. For a portion of the proceeds the company receives in case of success ( participation rate ). The size of the interest rate depends on the litigation funder, the extent of risk taken and the amount of the sum obtained. The quota can also be staggered. It amounts to 10 % of the sum actually achieved. Performs the final confrontation to a positive result, the litigation funders to pay the costs of the process, ie
- The court costs
- The costs of the opposing lawyer
- The expense of their own attorney
- All witness and expert fees.
When litigation funding, an application must be submitted for legal funding. The financier receives from the applicant all documents related in connection with the proceedings and shall make an intense legal scrutiny. Some lenders avail themselves of internal, others external lawyers to take account of particular local jurisdiction can practice with. Only when these assessments are positive, ie if the corresponding success exist, the case is transferred.
The Claimant will thus have a chance to enforce a valid claim without cost risk. It also protects its own liquidity, which is also attractive for many companies. In addition, companies with no requirement to designate litigation provisions in the balance sheet. The commissioned by the claimant lawyer gets the chance to lead a process for which financing has been secured to the end of the instance. He also receives a expert assistance on an examination of the opinion of the auditors.
Since 1998, the funding process has developed into an established institution of risk management in the legal market. After a certain amount in dispute ( this varies with the providers of 10,000 to 500,000 € ) all procedures are financed, promise the prospect of success and claim a cash benefit to which the litigation funder may be involved. In most cases, these are claims to cash benefits ( compensation claims from a succession, contractual claims, etc.).
In addition, litigation financing companies were temporarily installed between that summarize a large number of micro claims to the same topic and then enforce it for your clients. It is known, this form of financing process already from the American legal tradition, where again the claims of many injured are combined into a class action.
The Swiss Federal Supreme Court declared in 2004, the current in the canton of Zurich until now ban the financing process unconstitutional. Following this landmark decision established under some other litigation funders are already active in Germany in Switzerland branches and began to fund proceedings before civil courts in Switzerland. After this first short boom then was initially a consolidation of the supply-side market participants.
With the introduction of unified Swiss Code of Civil Procedure ( ZPO) in early 2011 and provided for therein, the plaintiff striking advance mandatory for the court costs, the demand of plaintiffs for a way to make the process cost finance and simultaneously shift the cost risk to a third party, clearly. Since then, the funding process has established itself in Switzerland, and now there are the Jura Plus AG in Zurich and the Profina Litigation Funding GmbH in train two local providers.
As part of his report dated July 3, 2013 on collective redress in Switzerland noted the Swiss Federal Council that the funding process is a suitable in principle but still too little used instrument for the improvement of collective redress. In order to promote the process of financing in this context, proposes the Bundesrat, among other things, impose on the competent courts of a legal obligation to inform litigants about the possibility of debt financing. Should remain Furthermore, according to the will of the Swiss government, however, the prohibition of contingency fees for lawyers pure agreement.
Since 1997 there has been litigation funding in the U.S.. The litigation funders are organized in the American Legal Finance Association.