VWM Capital makes it easy for investors to tap into the benefits of funding UK litigation claims.
With the number of claimants reaching out for legal finance on the increase, and regulatory reform making access simpler, we use sophisticated law tech and algorithms to deliver more efficient investing across a number of claims to minimise risk and maximise returns.
This glossary is designed to help those looking to take advantage of this opportunity. It can seem as though there’s a lot of legal jargon and technical terminology surrounding this area, but it’s actually quite simple when you understand the key terms.
And of course, if you have any other questions, we’re always happy to help.
Your litigation funding glossary
Litigation funding and related general terms
Third-party litigation funding (or TPLF, litigation finance, legal finance)
These terms all refer to someone not directly involved in a case providing funding to cover legal and other expenses. They represent any transaction in which legal claim outcomes are valued as financial assets and used to obtain capital.
Commercial litigation funding
Third-party financing of corporate litigation claims.
Consumer litigation funding
Third-party financing of individual or a collection of private litigation claims.
Scheme funding (or portfolio funding)
This refers to financing a volume of claims, usually smaller cases pooled to create an attractive investment. It is sometimes referred to as portfolio funding and provides an excellent way to minimise risk for the funder.
Appeals funding
Litigation funding provided before or during an appeal to enable the claimant to pursue the case through the appeal process.
Arbitration funding
Funds used for commercial arbitrations, which could be international treaty disputes or complicated commercial disputes.
Bankruptcy funding (or insolvency funding)
This type of litigation funding is made available to debtors, trustees or other stakeholders involved in corporate liquidation or reorganisation.
Tranche
A portion of litigation funding, released at intervals. An investment can be released, for example, every three months or at predetermined stages of the case (such as the completion of the motion to dismiss or the summary judgment).
Litigation funding parties
Claimant
The plaintiff in a legal dispute. The claimant is the party who might seek legal financing.
Funder
The funder is the third party who provides financing for a litigation claim.
Litigation funding assets
Asset monetisation (or claim monetisation)
A claimant can choose to monetise a legal claim in two ways:
- To fully monetise the litigation asset, they would assign the entire claim to a third party.
- Partial monetisation is when a funder advances some of the expected damages (usually as a non-recourse investment). In this case, the claimant remains the interested party, retains responsibility for pursuing the claim, and controls the legal strategy.
Collateral
The asset/s used to secure litigation funding – usually the expected damages award or settlement.
Litigation funding risk
Litigation risk
The level of risk involved in litigation funding. This may relate to factors such as duration, complexity, cost, or the evaluated likely outcome of a case or set of cases. The litigation finance industry addresses and minimises such challenges through the creation of a litigation risk market.
After-the-event (ATE) Insurance
Insurance available to cover legal fees if the insured party should lose the case. This is commonly used in the UK, but also on the increase in ‘loser pays’ cases in the United States.
Due diligence
The evaluation process of the merits and risks involved in a litigation investment, including assessing the claimant’s solicitor and the strength of the legal claim.
Litigation funding law
Champerty and maintenance
Champerty and maintenance are doctrines in some common law jurisdictions that aim to prohibit frivolous litigation. ‘Maintenance’ is the intermeddling of a party not directly concerned in the claim to encourage a lawsuit. ‘Champerty’ is “an aggravated form of maintenance” (Giles v Thompson, Lord Justice Steyn). It represents the promotion of litigation “by a stranger in return for a share of the proceeds” (Steyn). In nearly all jurisdictions (including the UK and United States) these doctrines do not prohibit commercial litigation funding agreements.
Control
Litigation finance companies are not allowed to control legal strategy or settlement decisions.
Judgment enforcement
After a judgement has been made for a case, this is the process that ensures the amount awarded is paid. It may involve further investigation, asset tracking, and additional litigation.
Litigation funding fee arrangements
Investment multiple (or percentage recovery)
This structures a funder’s return on investment in relation to the capital committed. As an example, the funder may receive, on a successful resolution of the case, their invested capital plus the negotiated amount, such as two times or three times the amount invested. See also ‘Share of award’.
Success fee
A pre-negotiated amount (either a fixed number or percentage) received by a funder in the event of a successful lawsuit.
Waterfall
A payment structure that specifies the order in which litigation proceeds are paid. Typically, this would be that the funder receives first priority on capital invested, then the funder and lawyers receive next priority on their combined returns, with the remainder going to the client.
Non-recourse investment (or non-recourse funding)
Share of award
These are different ways funders can charge for their investment into a claim:
- Share of the award – where funders receive either a percentage or a fixed sum of the case payout.
- Interest – where funders charge an interest rate on the capital provided over the time the funding is used.
- A mix of both a share of the award and interest.
Litigation funding agreement (LFA) (or litigation investment agreement, litigation finance agreement)
The formal contract between a litigation funder and a claimant, outlining the terms and conditions of the funding arrangement.
Term sheet
The non-binding offer made by a funder that details the terms and conditions of their investment. This is usually provided after an initial review of the case, but before due diligence is carried out.
Litigation funding with VWM Capital
At VWM Capital, we offer niche investment opportunities in UK litigation claims – which are uncorrelated to traditional capital markets and therefore relatively insulated from market volatility.
We generate highly attractive returns for investors by funding litigation cases that have high chances of success.
VWM Capital provides low-risk, protected investment opportunities that spread your litigation funding across a number of carefully selected cases.
By combining the power of AI-based algorithmic logic with independent legal expertise and decades of experience, we can offer investments with risk diversification benefits while simultaneously offering financial support to those who need it in order to access justice.
You can read more about how litigation funding works here. For all investment enquiries, please contact the team.