Third Party Contingency contracts in settlement and litigation

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German Working Papers in Law and Economics

AUTHOR:
Roland Kirstein and Neil Rickman

TITLE:
Third Party Contingency contracts in settlement and litigation

SUGGESTED CITATION:
Roland Kirstein and Neil Rickman (2002) "Third Party Contingency contracts in settlement and litigation", German Working Papers in Law and Economics: Vol. 2002: Article 21.
http://www.bepress.com/gwp/default/vol2002/iss1/art21

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ABSTRACT:
We present, for the first time, a model of recent institutional developments in litigation funding across several European jurisdictions. Recognizing the financing constraints that British cost rules may impose on litigants, these new contractual arrangements combine contingency fees with third party cover for cost in the event of losing the case: we call these “Third Party Contingency” (TPC) contracts. Signing a TPC contract can make filing a suit credible and may increase settlement amounts. This does not, however, increase the likelihood of going to trial, since TPC contracts are only of mutual benefit to the plaintiff and the third party when the case settles out of court. We also find that the mere availability of TPCs may generate the above strategic effect.