Legal Finance as a Business Tool
Legal finance is turning out to be a useful tool for businesses in Australia. It began with class actions and cases in insolvency. Today, it has a significantly bigger role to play in business disputes. It is being increasingly used by companies to finance legal affairs, mitigate risks, and secure cash flow.
What Is Legal Finance?
Legal finance, also known as third-party funding, provides businesses with funds to pay for legal expenses. The funder receives payment only if the case is successful. In the event of losing the case, the company generally owes nothing. This minimizes pressure on finances while allowing justice to be pursued.
How Australian Businesses Apply Legal Finance
Legal finance is no longer reserved for group claims. Businesses now use it to finance various types of legal claims, including:
- Contract disputes
• Business arbitration
• Investment disputes
• Intellectual property disputes
• Competition law disputes
• Asset recovery
Legal finance facilitates it to be simpler for businesses to manage significant legal issues without spending their own money. With more entrepreneurs getting familiar with it, legal finance is becoming an ordinary aspect of commercial planning.
New Arbitration Rules and Legal Funding
In April 2021, the rules of the Australian Centre for International Commercial Arbitration (ACICA) were modified. Now, when a company wins a funded case, they can recover the costs of the funding from the other party—if the arbitrator deems the costs reasonable.
This modification places greater significance on legal finance. It helps businesses with solid cases obtain support without the fear of excessive legal expenses.
Class Actions: What You Need to Know
Class action cases in Australia have been subject to numerous rule amendments. Courts have considered:
- Whether or not lawyers can also fund cases
• Who takes charge of the case
• How to handle several similar cases
• How settlements are authorized
These matters primarily concern group cases. If an organization deals directly with a funder for its individual legal issue, these rules typically do not apply.
Selecting the Right Legal Funder
Since legal rules are in flux, it’s critical to partner with a reputable funding ally. A good legal funder should provide:
- Experience in working on large and complex cases
• Support in various regions, particularly for international disputes
• Transparent terms with no surprise charges
• A non-recourse agreement—no cost if you lose
Case Example: Legal Finance in Action
An Australian financial services business had to initiate an arbitration proceeding after a property client defaulted on a contract. The business was able to finance the legal process with the assistance of legal financing. The funding contract was non-recourse. In the event that they lost, they paid nothing. They split the victory with the funder in the event that they won. This enabled the business to proceed with certainty and minimum risk.
Conclusion
Legal finance is not an afterthought. It’s an intelligent and secure means of managing legal fees, particularly in high-stakes disputes. At Financial N Legal House, we assist Australian businesses in leveraging legal finance to their advantage.
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