2022 - Dr. Arndt Eversberg

Important: Which litigation funder?

Effective enforcement of one's own claim requires the right litigation financier. But how do you find one?

The easiest way today – as in almost all situations – is via Google. The search engine then offers, in addition to advertisements, the Wikipedia entry (not suitable), a platform where one can set one's claim (unnecessary) and an overview of the lawyers' association that is quite current as of May 2022. The subdivision of the 18 companies listed there is only helpful to a limited extent, but at least you can easily get to the corresponding company pages via the links there.

Obviously, not every company will fund every claim. Litigation funders can be categorized as follows:

1. International financiers

Claims below higher values in the millions are not wanted here, those with an international connection are better off with smaller litigation financiers. This is especially true if the debtor is located abroad and a judgment has to be enforced outside Germany (Europe). Financiers for this would be e.g. Omni Bridgeway (Amsterdam/Cologne), Deminor (Brussels/Hamburg) and Nivalion (Zurich/Frankfurt).

2. National financiers

The two established financiers FORIS AG (Bonn) and Legial AG (Munich) basically finance all types of claims, which should, however, also amount to at least several hundred thousand euros. The websites provide information on the legal areas in which the companies focus (Legial: including insolvency law, FORIS: including inheritance law).

3. Special financiers

Some companies, often Legal Techs, specialize in niches, such as Erbteilung GmbH (Weilheim), which finances heirs who want to realize their share of inheritance from communities of heirs. Legal Techs usually run campaigns in which they bundle a large number of similar claims (diesel, flight delays, online casinos, fitness clubs, etc.). You can always find them by doing a Google search under the relevant keyword. A comparison of conditions is worthwhile here. In some cases, the claimant's claim is financed by the company itself; in others, the claimant's claim is purchased (RightNow GmbH, Düsseldorf).

4. Arbitration

Arbitration proceedings are a special field in which only a few litigation funders really know their way around and have the necessary financial resources. For Germany/Europe, for example, Omni Bridgeway (Cologne), for the rest of the world, in addition to Omni Bridgeway, Burford Capital (London/Zurich) and Habour Litigation Funding (London) should be mentioned.

Alternatively, you can contact me at any time and I will be happy to help you select the appropriate litigation funder.

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Article - 11/25/2022

Intro: Basic information on the "claim"

Soon, litigation funding will have existed in Germany for a quarter of a century.

What happened to the original idea of giving everyone access to justice? Where does litigation financing stand today? Has it already passed its zenith or is it currently transforming legal claims into a tradable financial product on a grand scale?

I would like to answer these and other exciting questions in this blog. But also purely practical questions: how do I find the right financier or is my claim - my client's claim - suitable for litigation financing at all?

Let's start with this important question: which claims are suitable for litigation funding?

The answer is initially simple: it must be a payment claim with a certain value, the legal enforcement of which appears to be predominantly successful and which can be serviced, i.e. paid, by the debtor in the event of victory.

(A) Payment claim:

A distinction must be made here between individual and mass claims. Whereas until a few years ago a minimum value of EUR 100,000 applied to an individual claim, this is no longer the case today. Claims in the lower hundreds of thousands rarely find a financier anymore. They look for claims with a value in the millions to make the effort and return worthwhile.

Mass claims are different. Here, a few months' dues from the fitness club are enough, provided they can be bundled with a large number of claims that are as similar as possible to form a large claim amount.

(B) Predominant probability of success:

A criterion that is judged differently from financier to financier (as well as from lawyer to lawyer). 51% to 49% is certainly not sufficient. If one arrives at a probability of success of more than two-thirds, taking into account many criteria (more on this in a later article), it can become interesting for a litigation financier. It is important to know that it is not so much a question of winning or losing 100%, but rather a question of what proportion of the raised claim can be realized as a result. From a financial point of view, the realistically achievable share should be ten times the probable costs or, in other words, 3 to 4 times the investment of the litigation financier as its return. More on these calculations in a later block article.

(C) Creditworthiness of the debtor:

Winning in court is only fun if you get the profit afterwards. It is not always the case that the defendant has something left at the end or that it is clear at the beginning how much is available to service a judgment. See the Wirecard case: the claims made there far exceed the capital still available in the insolvency and the coverage provided by liability and D&O insurance. Nevertheless, there seems to be so much there that lawsuits are worthwhile and they are also litigation-financed.

One will see...

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Article / Uncategorized - 10/07/2022

EU Parliament directive proposal on litigation funding

On 13 September 2022, the EU Parliament proposed a directive on "responsible private funding of litigation". This was to be expected and comes as no surprise in terms of both substance and content. Some already fear the end of commercial litigation financing (cf. Kolba, press release 16.09.22). But this does not have to be the case.

What exactly is the Parliament asking for? Essentially three things:

1. Regulation and supervision of litigation financiers.

After the industry has failed for years to organise itself in the EU and to regulate itself, it is logical that with the increasing volume of financing, the legislator feels compelled to take measures. A uniform EU regulation is demanded, which makes perfect sense because many proceedings today are cross-border and/or have several jurisdictions. Further a minimum capital, a registered office in the Union and an ombudsman's office for consumer complaints.

2. Upper limit for profit-sharing

A central aspect of regulation naturally had to be the desire for an upper limit for the financier's participation. It is demanded that at least 60% should remain with the claimant. At first sight, this is unproblematic, since in Europe rarely more than 40% profit participation is demanded anyway. However, it is problematic that for this purpose “all damages, costs, fees and other expenses” are to be included in the financier's share. This is unfair and unnecessary. The financier, as the cost bearer, will pay close attention to keeping these under control. If they exceed the originally calculated amount, this is due to the course of the proceedings and not infrequently to the fact that the defendant – which is his right – appeals. It must therefore remain the case that procedural costs are always initially serviced from procedural proceeds, even if this means that not much is left over in the end. This fate is then shared by the financier and the plaintiff. A different situation could apply if the mandated lawyers have a stake in the litigation financier, but abuse through excessive fees is likely to be the exception, at least in Europe (excluding the UK!). A fair compromise would be to set the upper limit at 50%, after compensation of all legal costs. Incidentally, this would be in line with current practice. However, it is problematic that the funder should not be allowed to “abandon funded parties (…) at any time”. This sounds like a “community of risk”, but it is only conditionally such. The financier is an investor who wants to make money and not sink it, and that is a good thing. This guarantees that procedures that are no longer promising will be terminated.

3. Disclosure and transparency

Disclosure of litigation funding? Why not? After more than 23 years, commercial litigation funding is a recognised and widely used instrument and no longer needs to hide. In a large part of the proceedings, disclosure is already made today and in consumer cases, idR class actions, this is done anyway in the context of bookbuilding. What is required is the naming of the financing company and the disclosure of the financing contract. This is unproblematic as long as the financing conditions and agreements on the conduct of the lawsuit and the enforcement of the claim remain secret. Anything else would be a violation of the fair trial, as the defendant could use the knowledge of the financial framework and approach for its strategy.

Conclusion:

Litigation finance regulation is coming, and it may – in a sensible form – even help the industry to grow further if the following key points are observed:

a uniform Union framework in coordination with the Directive EU 2020/1828
no over-regulation, agreement on appropriate minimum standards
a cap on profit-sharing at a maximum of 50% of the remaining revenue after costs and not more than that
preservation of the financier's entrepreneurial freedom to withdraw from proceedings at any time, provided that he indemnifies the claimant against all costs up to that point or until immediate termination.

The aim of the industry should now be to use regulation to be allowed to finance consumer associations in the sense of the Directive without restrictions in the future. This would help everyone:

A better consumer protection, an effective law enforcement and an industry that has always been committed to providing access to justice for everyone.

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Opinion - 10/07/2022

Important: Which litigation funder?

1. International financiers

2. National financiers

3. Special financiers

4. Arbitration

Intro: Basic information on the "claim"

Let's start with this important question: which claims are suitable for litigation funding?

(A) Payment claim:

(B) Predominant probability of success:

(C) Creditworthiness of the debtor:

EU Parliament directive proposal on litigation funding

1. Regulation and supervision of litigation financiers.

2. Upper limit for profit-sharing

3. Disclosure and transparency

Conclusion:

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