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A litigation financing agreement is a specialized contract that enables you to secure external funding for pursuing legal claims in Switzerland or under Swiss law. This document establishes a comprehensive framework between you as the funded party and a litigation funder, outlining the terms under which financial support will be provided for your legal proceedings. The agreement must comply with Swiss regulatory requirements while protecting both parties' interests throughout the litigation process.

When do you need this document?

You need this agreement when pursuing high-value commercial litigation or international arbitration but lack sufficient resources to fund the proceedings independently. This document is essential for complex disputes involving substantial legal costs, expert witness fees, and potential adverse cost orders. Companies facing financial constraints due to the underlying dispute, insolvency proceedings, or cash flow issues particularly benefit from litigation funding arrangements. The agreement is also valuable when you prefer to transfer litigation risk to a specialized funder while maintaining control over your legal strategy. International arbitration cases often require significant upfront investment, making litigation funding an attractive option for accessing justice without depleting operational resources.

Key legal considerations

The agreement must clearly define the scope of funding coverage, including legal fees, court costs, expert expenses, and potential adverse cost liability. Return structures typically involve either a multiple of the funding amount or a percentage of recovery, with provisions for priority payments to the funder. Control rights represent a critical consideration, as you must balance the funder's legitimate interest in protecting their investment with your autonomy over litigation strategy. Termination clauses should specify circumstances under which either party may exit the arrangement and the consequences of early termination. The agreement must address confidentiality obligations, as funders require access to privileged information to assess and monitor the claim. Security and enforcement provisions ensure the funder's priority right to recoveries while protecting your residual interests in the proceedings.

Legal requirements in Switzerland

Swiss law under the Code of Obligations generally permits litigation funding arrangements without significant regulatory restrictions. The agreement must comply with good faith principles and cannot constitute an abuse of rights under Swiss Civil Code provisions. Professional conduct rules for legal representatives must be observed, ensuring that funding arrangements do not compromise attorney-client privilege or create conflicts of interest. The Swiss Civil Procedure Code's cost allocation rules may affect funding structures, particularly regarding security for costs and adverse cost liability. If the arrangement involves investment characteristics, compliance with the Federal Act on Financial Services may be required. Courts may scrutinize funding arrangements for champerty or maintenance concerns, though Swiss law is generally permissive toward third-party funding. The agreement should include provisions for compliance with any applicable disclosure requirements in the underlying proceedings and ensure that funding does not improperly influence the conduct of litigation.