The Signal of Disclosing a Litigation Funder


This article follows our article on the game theory of litigation and its “signaling events”.

One such signal is unique to a party that utilises a litigation funder and discloses its presence to their opponent.

It is common in high-stakes litigation for an opportunistic defendant to adopt a dilatory strategy to frustrate the legal process and wear down a claimant through depletion of his financial resources.

They create frivolous “side shows” in the dispute that aim to obstruct the main dispute’s path to court. It puts pressure on the claimant to end the litigation and accept a settlement far below the claim’s true value because the main dispute becomes too expensive in time and costs to prosecute.

This strategy, however, is not a default defense. It is executed by a defendant who senses that the claimant’s financial or commercial position could not sustain such attrition. It expensive to execute but its value is that it can result in a very favorable settlement.

Litigants constantly abandon or prematurely settle their litigation owing to this strategy. Individuals, SMEs, and even corporates, do not have unlimited budgets, time, and resilience to litigate against a Defendant employing a dilatory strategy. They simply cannot afford to slay this type of dragon.

To overcome such a defense, a litigant needs a funded steadfast attorney and counsel who can intelligently navigate through a series of both sophisticated and obvious traps that aim to obfuscate and delay the real issues coming to court.

Unfortunately, contesting this strategy does not come cheap and that is why such a defense is often successful.

A litigation funder brings a war chest of weapons to thwart such a defense, regardless of whether or not their presence is disclosed.

However, disclosing the funder’s presence shifts the claimant’s paradigm and dramatically affects how the defendant views his opponent. For this reasons, a litigant would be well served in disclosing the fact that he has a litigation funder staking his claim, although such disclosure is not mandatory in law.

The funder is an independent entity that has objectively examined the claim, determined its value and prospects, and is willing to risk its own money on the outcome of the litigation and is not concerned with its duration. A defendant’s strategy to delay and frustrate now seems a futile exercise when the presence of a third-party litigation funder is disclosed.

Therefore, the veracity of disclosing a litigation funder is hugely valuable and exponentially increases the prospect of a favourable settlement.

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