Law Practice Management
3rd-Party Investors Help Defend U.K. Corporate Cases
Posted Apr 17, 2008, 10:40 am CST
By Martha Neil
A small number of companies are now using third-party funding to help defend corporate litigation in the United Kingdom, and hedge funds are among the potential funding sources.
"The pioneering move has major implications for corporates facing large claims since the process, in theory, allows a company to put a ‘market price’ on its liability and manage much of the litigation risk," reports Legal Week.
Although companies can generally afford to fund their own defense, paying a third party a fee in exchange for the funder's agreement to pay part of the damages if the defense isn't successful allows companies to, in effect, insure themselves against a major damages hit, explains the legal publication. If the defense is successful, the third party investor helping to fund the defense retains the fee.
As discussed in an earlier ABAJournal.com post, third-party funding of litigation is becoming a standard option available to plaintiffs represented by major U.K. law firms.