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How litigation funding works: a guide on how to obtain justice without the risk of costs
Anyone who bequeaths in Deutschland or Schweiz cannot completely bypass their relatives. The right to a compulsory portion obliges the testator to pay out a minimum share to a narrow circle of people. Children, spouses or registered partners are thus also reliably protected in 2025, albeit with different percentages. In Deutschland, the compulsory portion remains unchanged at half of the statutory inheritance share. Schweiz modernised the system in 2023, reducing the share for descendants and abolishing the compulsory portion for parents. In this article, you will find out who is entitled to a compulsory portion today, how the amounts are calculated, what options are available and what deadlines must be observed.
Introduction to the world of litigation funding
Litigation financing has become increasingly important in recent years, primarily due to the development of legal tech services. These offer the possibility of enforcing claims without cost risk and in return for a share of the success. However, such offers are usually limited to standardisable legal problems, meaning that they are not applicable to all legal disputes.
Definition and basic principles
Litigation financing is a legal financial service in which a litigation financier assumes the costs of pursuing private or commercial claims out of court or in court. The aim is to facilitate access to justice by minimising financial hurdles for the plaintiff.
How litigation funding works
The way litigation financing works is based on an agreement between the claimant and the financier. The financier bears all the necessary costs of the proceedings and, if successful, receives a predetermined share of the amount won. If the legal dispute fails, the financier bears the costs, while the claimant has no financial obligations.
The various players in litigation funding
Various players play a central role in the area of litigation financing. These include the claimants, the legal profession and the litigation funders. Each of these players has specific interests and responsibilities that shape the overall picture of litigation funding.
Role of the claimants
Claimants are individuals or companies who wish to enforce a legal claim. Litigation financing offers them the opportunity to pursue their rights without having to take on the risk of financial burdens.
Importance of the legal profession
The legal profession plays a decisive role in litigation financing, as it takes on the legal representation of the claimants. Lawyers are often the ones who inform their clients about the possibility of litigation funding and guide them through the entire process.
Framework of litigation financing
The litigation funding framework includes the conditions and criteria that apply to the utilisation of this form of funding. These include the prospects of success of the case and the associated cost risk.
Conditions for utilisation
In order to be considered for litigation funding, certain conditions must be met. These include the chances of success of the case and the amount in dispute. These criteria are decisive for a financier's decision to support a case.
Prospects of success of the case
The chances of success of a case are the primary criterion for litigation funders. Financing is only considered if a case has a good chance of success. This serves to minimise the risk for the financier.
Cost risk and minimisation
The cost risk of a legal dispute is an important consideration for claimants. Litigation financing can minimise these risks, as the financier bears the costs in the event of a defeat.
Advantages of litigation funding
Litigation funding offers numerous advantages for all parties involved. It provides access to justice for those who cannot afford the costs of litigation and offers lawyers the opportunity to provide their clients with comprehensive support.
For claimants
For claimants, litigation funding offers the decisive advantage that they can pursue their legal claims without financial risk. This opens up new opportunities for many individuals and companies to obtain justice.
For lawyers
Lawyers benefit from litigation funding by being able to represent clients who would otherwise refrain from taking legal action for financial reasons. This expands the potential client base and promotes the right of access to justice.
For companies and private individuals
Litigation financing offers both companies and private individuals considerable financial relief in the event of a legal dispute. The assumption of legal costs by a third party eliminates the need to set aside provisions for potential legal costs, which can significantly reduce the burden on a company's balance sheet. Private individuals also benefit, as they are protected from the often unpredictably high costs of a legal dispute and can preserve their liquidity for other important expenses. A customised financing model that adapts to individual needs increases the accessibility of legal action without the worry of not being able to bear the financial burden.
Process of litigation financing
The process of litigation financing typically begins with the financier assessing the prospects of success of a case. This is a crucial step, as financing is usually only granted if the prognosis is positive. If the prospects of success are assessed favourably and an agreement is reached on the terms of the financing, the financier assumes the costs of the legal dispute. In the event of defeat, the financier bears the cost risk, which relieves the claimant of financial burdens. This structure also makes it possible for those who do not have legal expenses insurance or are not eligible for state legal aid to pursue their legal claim.
Initial contact and preliminary review
The first step towards litigation financing is the initial contact with the financier, during which an initial assessment of the chances of success of the case is made. This preliminary assessment is usually free of charge and enables the claimant to clarify whether litigation funding is an option without any financial risk. It is helpful to provide the financier with comprehensive information about the case at an early stage in order to enable a well-founded assessment of the chances of success.
Contacting the litigation funder
When contacting a litigation funder, it is important that the company or private individual provides all relevant information and documents. This enables an efficient preliminary examination of the case. Consideration of the status of state legal aid and other financial assistance options is also an important aspect of this phase. The financier can then make an initial assessment of the chances of success based on the information provided.
Preliminary review and detailed review
The preliminary review serves to assess the basic suitability of a case for litigation funding. If this is positive, a detailed examination follows in which the prospects of success of the case are analysed in more detail. This phase often includes a more comprehensive assessment of the legal situation and a closer look at the costs associated with the legal dispute.
The financing agreement
Following a positive assessment of the prospects of success and a decision on financing, a financing agreement is drawn up. This contract regulates the conditions of the financing, including the amount of financial support and the financier's profit share. It is important that all conditions are clearly defined and understood by both parties in order to avoid misunderstandings later on.
Conclusion and conditions
The terms of the financing agreement are crucial as they determine the distribution of the financial risk and the financier's profit share. At this stage, close scrutiny and, where appropriate, negotiation of the terms of the agreement by the claimant and their legal counsel is essential to ensure that the agreement is fair and in the best interests of the claimant.
Implementation of the legal dispute
Once the financing agreement has been concluded, the actual litigation begins. The claimant's lawyer works closely with the litigation funder to conduct the case in the best possible way. Communication and co-operation between all parties involved is crucial to the success of the proceedings.
Cooperation between lawyer and financier
Effective collaboration between the client's lawyer and the litigation funder is crucial to the success of the litigation. The lawyer plays a central role in communicating the developments of the case and in strategising, while the financier bears the cost risk and therefore has a strong interest in the successful outcome of the proceedings.
Special aspects of litigation financing
Litigation financing has evolved in recent years and offers special aspects that distinguish it from traditional financing models. These include, in particular, the possibility of financing legal disputes without prior waiting periods, which enables immediate legal support. It also covers a wide range of legal areas and offers solutions that are tailored to the individual needs of clients.
Litigation funding covers a variety of legal areas and offers support for a wide range of disputes. From civil disputes to labour law disputes, clients can benefit from financial support to enforce their legal claims. The flexible application of litigation funding to different legal situations makes it a valuable tool for litigants.
Civil law disputes
Civil litigation covers a wide range of disputes, including contractual disputes and claims for damages. Litigation funding allows parties to pursue these disputes without having to worry about the associated costs. This increases accessibility to the legal system and promotes fairer enforcement of claims.
Termination scenarios under labour law
In the area of labour law, particularly in the case of dismissal scenarios, litigation funding offers those affected financial support to take action against unjustified dismissals. The ability to take legal action without any financial burden strengthens the position of employees and enables them to effectively protect their rights.
Financial aspects and contract commitment
The financial aspects of litigation financing include the assumption of all legal costs by the litigation financier, which represents a significant relief for the injured party. The litigation funder bears the full cost risk, including court and legal fees, and in return receives a pre-agreed share of the proceeds if the case is successful. This agreement enables people with legitimate claims to enforce their rights without having to bear the financial risk of a legal dispute.
Assumption of costs and payment of fees
The assumption of costs by the litigation funder covers all expenses incurred in the course of the litigation. This includes court costs, legal fees and other necessary expenses required to conduct the legal dispute. If the case is won, the claimant pays the funder a pre-agreed fee, which is usually a share of the profit realised. This structure ensures that access to justice does not depend on the financial means of the individual.
The role of technology and speed
Advancing digitalisation has not stopped at litigation funding and is making a significant contribution to increasing efficiency. By using technology, litigation funders can process applications more quickly, which leads to faster decision-making. This is particularly beneficial for claimants who need their legal matters resolved quickly. Digitalisation also enables more transparent communication between all parties involved.
Digitalisation in the context of litigation financing
Digitalisation facilitates access to litigation financing by simplifying the submission and processing of financing requests. Applicants can submit their documents digitally, which speeds up the process and shortens processing times. In addition, the use of specialised software solutions enables a more efficient review of the case's chances of success and faster communication of decisions to applicants. Digitisation therefore makes a significant contribution to speeding up the entire process.
Comparison with legal expenses insurance
Litigation financing offers a number of advantages over traditional legal expenses insurance and differs in some key respects. While legal expenses insurance usually requires an ongoing premium payment and often only covers certain areas of law, litigation funding offers a more comprehensive solution that covers all the costs of a legal dispute without the claimant having to make any payments in advance.
Differences and similarities
A key difference between litigation financing and legal expenses insurance lies in the cost structure and assumption of risk. With litigation financing, the litigation financier assumes the full cost risk of the proceedings, whereas with legal expenses insurance, the policyholder pays regular premiums regardless of whether a legal dispute is conducted or not. What both models have in common is the aim of facilitating access to the legal system and enabling claims to be enforced.
Why litigation funding is often the better choice
For many claimants, litigation funding is a more attractive option than legal expenses insurance, primarily because the litigation funder assumes the entire cost risk. This means that no costs are incurred by the claimant in the event of losing the case. In addition, litigation financing is not bound by the restrictions that may exist with legal expenses insurance with regard to the areas of law covered and the amount of costs assumed. Litigation financing therefore offers a flexible and low-risk option for enforcing legal claims.
Outlook: The future of litigation funding
Litigation financing is in a constant state of flux and is increasingly influenced by technological developments. The integration of digital solutions not only improves the efficiency of litigation financing, but also expands the opportunities for claimants to enforce their rights. The development of new litigation financing models that are tailored to the individual needs of clients will further increase the accessibility and attractiveness of this form of financing.
Market developments and innovations
The future of litigation financing is largely determined by innovations and market developments. New providers and financing models are entering the market and offering specialised solutions for various areas of law. Increasing digitalisation enables faster and more transparent handling of financing processes, which makes litigation financing attractive to a broader target group. The continuous development of the sector promises more efficient and accessible litigation for all parties involved.
The role of litigation funding in legal practice
Litigation funding is playing an increasingly important role in legal practice by democratising access to the legal system and making it fairer. It enables individuals and companies to enforce their legal claims regardless of their financial background. Litigation funding helps to minimise the risk of financial exposure from legal disputes and thus promotes fairer legal proceedings. Its importance is expected to increase in the coming years as more and more people and companies benefit from this form of financing.
Conclusion: Why litigation funding is a smart decision
Litigation funding offers valuable support for individuals and companies who wish to assert their legal claims without having to bear the full financial risk of a legal dispute. With the litigation funder covering all the costs of the proceedings and the possibility of pursuing legal claims without having to pay in advance, litigation funding is an attractive alternative to traditional legal action. Ongoing digitalisation and the development of new financing models promise even greater accessibility and efficiency in the future.
Summary of the key points
Litigation financing is characterised by the assumption of cost risk, fast and efficient processing thanks to digital technologies and flexibility with regard to contractual obligations. It offers low-risk access to the enforcement of legal claims and represents an important addition to the area of legal services. Continuous further development and adaptation to the needs of claimants will further increase the relevance of litigation financing.
Decision support for potential claimants
For people who are faced with the decision of whether to utilise litigation funding, it is important to understand the benefits of this form of funding. Litigation funding allows legal claims to be pursued without financial risk and without the need to pay for the costs of the proceedings upfront. Choosing the right litigation funder that takes into account individual needs and the specifics of the case is crucial to success. Potential claimants should therefore carry out a careful examination and selection of the litigation funder.
