It’s been a growing trend for some years now—the idea of litigation funding. It’s the practice of hedge funds or individual investors floating the financing for lawsuits for companies or people who are unable to do so, taking the chance that the investors will see a nice return on investment as a result of a settlement or victorious decision.
A recent article in the Wall Street Journal (WSJ) points to two cases that may underscore the growing risks that come along with litigation funding. One such suit involved U.S.-based Excalibur Ventures, which was pursuing more than $1.5 billion in its suit against two oil and gas companies over an interest in oil fields in Iraq. While the investors expected a handsome payout at the end of the three-year litigation, a U.K. judge last week dealt the parties a harsh blow when he dismissed all of Excalibur’s claims. Excalibur, it appears, may end up owing tens of millions of dollars in court costs as a result.