"Insanity of the brave" or investments in litigation

in #business2 years ago

Despite the fact that in Russia the price of legal services is much lower than abroad, the cost of quality and professional support is often quite large. Owing to unequal material opportunities of the parties, disputes happen and don't reach court. However, business is always in search of potentially profitable areas for investment. Crowdfunding is slowly but surely gaining momentum for trials as well.

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If you have an irreconcilable desire to sue, and the assessment of the prospects of the claim is high, the payment of legal representation, expertise and other costs, will assume "investors in the proceedings". At its core, this is a variation on the theme of "success fee", only pay is not necessary for us, we only need to share the percentage in case of success.

After winning a court, the investor gets their investment through recovery of costs from the losing party, and his profit is enclosed in a pre-specified percentage of our share. In fact, the investor shares with us the risks, the burden of proof and the problems with the lawyers (who mistakenly predicted the outcome of the case) who are no longer our concern.

This practice, which appeared in the UK back in the 70s, is being successfully implemented in many countries. For example, in the US alone, the litigation Finance market is valued at more than $ 5 billion, and Burford Capital, a leading player in the market, has a margin of nearly 80%.

Small business around the world can not afford long and expensive litigation with corporations, without funding, they are almost always content with crumbs or nothing at all. That is why more than a hundred hedge funds and thousands of private investors are already investing in lawsuits. Of course, it all depends on the amount of the claim, when it comes to the possible receipt of hundreds of thousands or millions, although services such as Lex Shares, Platforma and others are already functioning.

Services resemble crowdfunding familiar to many, when a potential claimant collects investors ' funds, in this case, to protect their rights in court. Lawyers receive not only payment, but also a means of promotion through high-profile trials. A very bold and interesting idea to combine the efforts of professionals and a lot of money in the fight with large companies that are difficult to beat on someone else's field, especially without attracting serious forces.

Absence of common practice in the United States of collective claims of citizens is also not in favor of the development of investment and recognition of Russian justice modern. Ordinary people still find it difficult to unite against large corporations, and often in banal disputes with management companies, medical institutions, travel agencies...

Predictability of judicial system of Russia is far from faultless, the raised funds do not guarantee success of business, they only go for payment of qualified specialists. We are still not common practice and "there is no victory, no reward" when lawyers get paid only if successful. But should they be blamed? After all, there is no normal legislative regulation, "fees of success" in the case of failure of the client to recover almost impossible.

Assessment of the prospects of the case is also intricate: it is necessary not only to understand all the materials, but also to calculate their costs, the solvency of the defendant, the projected dates taking into account the probable appeal, relevant jurisprudence and much more. This is, of course, a high-risk investment, reminiscent of the processes of venture capital funds, when the inevitable losses are initially laid in the amount of attracted funds.

Investor little protection against deception "intermediaries" in fundraising, and ambiguous judicial practice disputes about the payment of compensation after winning the case in Russia, turning the funding of proceedings in a tote instead of an investment.

It is a Pity that the existing business models in the West of insurance risks from compensation for loss of business, and did not come fully to Russia. This possibility for a developed justice system is the choice between the transfer of risks with costs to investors and the instrument of insurance in case of loss...

Given the unstable state of the majority of Russian companies and their over-crediting, I believe that the practice of litigation financing is beneficial for all its shortcomings, which means that the demand for special investors will only increase over time. I am sure that many law firms will adopt a similar model of working with clients, because the number of litigation in Russia is only increasing.

In the meantime, in the Wake of the noise around the deliberate slowdown of the old iPhone models, NLF Group is trying the mechanics of sponsoring litigation. In return for a percentage of the potential compensation, they are ready to confront the strong side in the long processes and provide claims of Russian consumers against the "Apple Corporation". Well, as they say, the law protects everyone who can hire good lawyers :)


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