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...