Litigation finance

Feb, 04 2020

A new type of financing is becoming popular is Russia – investing in third party’s lawsuit. Over the last 2,5 years private investors have covered legal costs with a total lawsuits amount of more than 9,3 billion rubles. Abroad, this type of financing is called litigation finance and has become an integral part of modern justice system for a long time now.

The essence of litigation finance is that investor covers legal costs of one of the parties to dispute and at the end of trial receives a pre-a greed percentage of winning, which is normally around 20-40%. Investor may directly become a party to the dispute by concluding an agreement on assignment of claim with plaintiff, or he or she may leave all the legal proceedings on plaintiff and only go with the financing.

A judicial investor can be either an individual or a legal entity. Firstly, investor needs to evaluate probability of winning. In case of deciding to finance lawsuit, investor will bear all the costs of this lawsuit. Further, depending on length of trial, investor can monitor progress through online platform to which this lawsuit is tied. Such platforms already operate in Russia and act as an intermediary between plaintiff and investor. One of the first and most popular platforms is Platforma (https://platforma-online.ru/#).

According to a World Bank study by Doing Business, Russia occupies one of the leading positions in Europe regarding speed of resolving commercial disputes. This makes the country attractive in this area for both Russian and foreign investors. Moreover, thanks to this type of financing, investors can not only benefit, but also defend their social and public interests.

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