What Is Financial Litigation?

Litigation financing first emerged in the United Kingdom and the United States. As the name implies, the litigation business involved by lawyers and the financing business of financial economists were combined. Specifically, in the lawsuit, because a party to the lawsuit cannot temporarily or completely pay the relevant legal fees, notarization fees, and appraisal fees required by the lawsuit, the third-party company will advance the advance. Recover the advances it has made and obtain a certain percentage of revenue. The third-party companies mentioned here are generally capital companies or loan companies with professionals in the legal and financial industries and a certain amount of funds.

Litigation financing

In general, the contract signed for litigation financing should include several aspects:

First, the amount of investment. The investment amount is mainly negotiated and determined by the investor and the funded party based on the specific circumstances of the case. Generally speaking, the more complicated the case, the larger the amount of the litigation target, and the higher the investment amount.

Second, the use of funds. Litigation financing is used to pay for litigation expenses, including those collected by the court

There are currently three types of litigation financing, mainly between the plaintiff and the loan company.

The first is consumer law

Litigation financing, as an innovative method to share the risks of litigation, is an opportunity for the financial industry to enter the legal industry. It is an opportunity for both the financial industry and the legal industry.

For the financial industry,

Developments abroad

As early as 1967, England and Wales had allowed the establishment of specialized litigation funds, which did not really gain recognition and develop rapidly until the past 10 years. Australia allowed third-party financing of civil litigation in 1990. Up to now, more and more companies have litigation financing, including Bolford, which was founded in 2009, and Legal Capital Management, which was founded in 2007. Their fund projects have been listed in London; founded in 2011 And two companies, Black Robe Capital and Froker Capital Management, run by lawyers in 2012; Parabellum Capital, which was founded by Credit Suisse's previous litigation financing team; Harbour, which was formally established in 2007, and U.S. Gurchen Keller Capital.

Some foreign loan companies participate in the litigation financing business, which mainly provides loan services for the plaintiffs. They generally think that the plaintiffs have an active position in the litigation, and serving the plaintiffs can better ensure that they can obtain profits from the investment litigation.

In the United States, there is a relatively large event in litigation financing. In 2011, an article entitled "Did Wall Street overdo it" was published on Forbes Chinese. The article talked about some investors and hedge funds' lawsuits for medical negligence. The case provides funding and forces doctors to leave the medical profession. After this incident, many litigation lawyers turned their "professional" money-making eyes on doctors, companies and other targets-especially when they provided funds for medical negligence lawsuits through hedge funds, which brought about a new industry, This is litigation financing. ^[2]

Developments in Hong Kong, China

In Hong Kong, the core question that courts need to answer when assessing whether a transfer of legal property is 'violating the law prohibiting the solicitation and adjudication of litigation' is whether the transaction has a proper commercial purpose and will not cause damage to judicial and litigation procedures. Crisis. "The law in Hong Kong still prohibits the collection of litigation and assistance, but the case has allowed further development of litigation financing in Hong Kong. According to the above judgment, as long as it is conducive to judicial justice, it will not affect the execution of judicial work and the judicial process. Under the premise of being correct, litigation financing is allowed. ^[2]

China's Domestic Development Status and Prospects

It is difficult for lawyers to obtain a continuous source of cases, tedious process of inefficient case handling, high thresholds for lawyer fees, and severe localization restrictions on case handling, etc., making traditional legal persons aware of the pain points of the industry; and the impact of the Internet economy has made many laws People began to think about how to rely on the Internet to realize the transformation of the industry so as to gain a competitive advantage. Since then, the legal e-commerce industry has begun to explore slowly. However, the legal e-commerce industry has not developed smoothly, and most platforms have so far been difficult to make a profit. The reasons for the development of the legal e-commerce platform are blocked: 1) the personalization of legal needs and the regionalization are not conducive to the promotion of the Internet, 2) the homogeneity of the legal e-commerce platform is serious, the competition is becoming increasingly fierce, 3) the frequency of legal services is low, 4) the legal reality The exact matching of needs with the right lawyers is difficult. In summary, it can be seen that the development of the legal e-commerce platform is gradually limited. Where is the next outlet of the legal e-commerce industry? ^[3]

Civil lawsuit is an act with great economic benefits. The result of the lawsuit may bring rich returns to the parties, which makes the civil lawsuit gradually attract the attention of financial investors. In the United States, when some lawsuits end with jury verdicts and huge compensation, they will bring huge returns to investors. Nowadays, litigation financing has been introduced into China. Some domestic lawyers and professionals in the financial industry have set their sights on the litigation financing market and want to take a share of it.

At present, people's awareness of rights protection is getting stronger and stronger, and their understanding of the law is getting deeper. When they encounter violations of their own rights, they will immediately think of protecting their own interests through legal means, and there will be more and more lawsuits. . However, in many cases, many of the victims chose to give up the lawsuit because of the higher costs required by the lawsuit, and silently bear the violation. Litigation financing can solve this situation very well, so that victims who lack funds can make good use of legal means to safeguard and fight for their own interests. From this perspective, litigation financing is still huge in China's market or potential market, and its development potential is huge. At present, some lawyers and professionals in the financial industry have begun to enter this market, and some small companies in China have started litigation financing.

At present, China has not really formed a market for litigation financing business, but some people who are concerned about foreign litigation financing markets have introduced litigation financing into China. The government and judicial authorities have not commented or issued any relevant documents on litigation financing. It will take a long time for litigation financing to root and grow in the domestic market. However, judging from the current developments abroad, the development of litigation financing is a general trend. We should seize the opportunity and use the limited resources available to be the pioneer in developing litigation financing business in China. ^[2]