Understanding the Language of Litigation Finance
The world of private capital and legal finance comes with its own terminology. This glossary is designed to provide clear, concise definitions of key terms commonly used in litigation funding and private legal investment. Whether you're an investor, advisor, or legal professional, these short-form explanations will help you navigate the space with confidence and clarity.
% Recovery (Share of Award)
A funding arrangement where the funder receives an agreed percentage of the total settlement or judgment.
Asset Monetisation
The process of converting a legal asset—such as a judgment or award—into immediate capital through funding or sale.
Claim Monetisation
Upfront funding provided based on the value of a pending claim, allowing the claimant to access capital before resolution.
Collateral Assets pledged as security for funding; used to reduce risk or enhance recovery prospects.
Commercial Litigation Funding (LF)
Funding provided for business-related legal disputes, such as contract breaches, IP infringement, or corporate claims.
Consumer Litigation Funding (LF)
Funding provided to individuals for personal claims, such as injury, employment, or class actions.
Interest
A return paid to the funder calculated as interest on the capital provided, often alongside or instead of a success fee.
Non-Recourse Funding
A type of financing where the funder is only repaid if the case is successful; the claimant has no obligation to repay if the case fails.
Scheme / Portfolio Funding
Funding provided across multiple cases or claims under a single agreement, reducing risk through diversification.
Success Fee
An additional payment made to the funder or law firm upon a successful outcome, often structured as a percentage uplift.
Waterfall
The agreed order in which litigation proceeds are distributed between the claimant, funder, and legal teams.
Arbitration Funding
Funding provided to cover the costs of legal disputes resolved through arbitration instead of court litigation.
After-the-Event (ATE) Insurance
Insurance that protects a claimant from paying the opposing party’s legal costs if the case is unsuccessful.
Case Merits
An assessment of the legal strength, credibility, and likelihood of success of a claim.
Contingency Fee
A legal fee arrangement where lawyers are paid only if the case is successful, usually as a percentage of the recovery.
Enforcement Funding
Capital used to recover judgment or arbitral awards—particularly in cross-border or hard-to-enforce cases.
Funding Agreement
A legal contract outlining the terms and obligations between the funder and the claimant.
Litigation Funder A third-party financier that covers legal costs in exchange for a share of the proceeds if the case succeeds.
Milestone Payments
Funding provided in tranches, based on the progress of the case or predefined milestones.
Outcome-Based Pricing
A pricing model where fees or returns vary depending on the result of the case.
Priority
The order in which proceeds from a legal claim are distributed among involved parties, usually defined in the waterfall.
Residual Value
The funder’s remaining interest or rights in a case after initial recoveries or distributions have been made.
What is the estimated size of the Litigation Funding (LF) industry?
As of 2024, the global litigation funding market is valued at approximately USD 23.57 billion. Projections indicate growth to around USD 59.78 billion by 2034, reflecting a compound annual growth rate (CAGR) of 9.62% during the forecast period. EIN News
What is the typical profile or structure of a litigation funding investment vehicle?
Litigation funding investment vehicles are commonly structured as private funds, such as limited partnerships, managed by experienced litigation finance professionals.
These funds pool capital from institutional investors, family offices, and high-net-worth individuals to finance a diversified portfolio of legal claims.
Returns to investors are typically realized through a share of the proceeds from successful cases, often structured as a multiple of the invested capital or a percentage of the recovery. omnibridgeway.com
What is the typical portfolio composition and percentage attribution in litigation funding?
A well-structured litigation funding portfolio aims for diversification across various dimensions:
Case Types: Including commercial litigation, intellectual property disputes, international arbitration, and class actions. https://www.credenceresearch.com/report/litigation-funding-investment-market?
Number of Cases: Portfolios may consist of multiple cases, often ranging from a handful to several dozen, depending on the fund's size and strategy. omnibridgeway.com
Weighted Duration: The average duration of funded cases typically spans 12 to 36 months, with some complex cases extending beyond this range.
For instance, Woodville's litigation funding portfolio comprises 2,744 active cases with an average case duration of 12–18 months. Their diversified approach includes 155 distinct case types, aiming to mitigate risk and enhance returns. Expat Wealth At Work