Commercial process financing is a legal financial service with the character of an investment vehicle. The litigation financing company assures the entitled party that it will bear all litigation costs in return for profit-sharing and a security assignment. The process financing company covers the necessary capital requirements either through its own resources or on the capital market. Marcel Lötscher examines the contractual and business model of litigation financing and distinguishes it from other forms of third-party litigation financing. In addition, he conducts a detailed microeconomic analysis in addition to the economic analysis of the law. Based on the probability of process success and the risk behaviour of the parties entitled to claim, the different decision-making models are shown. Lötscher discusses the possible subordination to the AIFM Directive as a regulation of managers of alternative investments and develops a test scheme for this purpose. This should be a useful aid for all those involved in the procedure who are confronted with the problems identified in daily practice. Finally, he presents the model of a litigation cost fund and the economic and legal opportunities for regulation.
See also the blog post: Litigation fund in a nutshell