Procedure of Litigation Funding


Registration is required to use the AEQUIFIN platform. By submitting the registration form, the user accepts the General Terms and Conditions of the AEQUIFIN Platform and confirms that he has read and agrees to the Privacy Policy.

After submitting the registration form, the user will receive an e-mail with an activation link to the e-mail address provided. By clicking on the activation link, the user confirms the correctness of the e-mail address provided by him/her (double opt-in procedure).

After an internal check, AEQUIFIN will inform the platform participant of a successful registration by e-mail (registration confirmation). With the registration confirmation, a contract for the use of the AEQUIFIN platform is concluded (platform contract).

The participant receives a personal user account and is entitled to use the AEQUIFIN platform with his user ID and password of his choice.

When registering, the user chooses how he wishes to use the AEQUIFIN Platform. The following are possible:

  • as a litigant
  • as a sponsor
  • as a lawyer

Platform users registered as a litigant can submit a case enquiry on the "Submit Case Enquiry" page. If a litigant does not yet have a lawyer, he can find a suitable lawyer via the AEQUIFIN platform (see: Using the Platform - 1).

A litigant also has the option of using the AEQUIFIN platform as a sponsor if he also chooses the option "Register as sponsor" when registering.

Sponsors have access to the cases published on the AEQUIFIN platform (see: Using the platform - 3.). During the Question Phase of a case, they have the opportunity to ask questions to the registered lawyer of the case (see: Using the Platform - 4.) as well as to participate as sponsors in the AEQUIFIN Quota Balancing and support cases financially (see: Using the Platform - 5.).

A user registered as a sponsor can also submit case enquiries via the "Submit Case Enquiry" page if he also chooses the "Register as a Litigant" option when registering.

Sponsorship limit

The sponsorship limit entitles the user to submit a sponsorship offer.

A registered sponsor has a personal sponsorship limit. This determines the maximum total amount of sponsorship he can make on the AEQUIFIN platform. Already fulfilled payment obligations from a sponsorship will not be included in the sponsorship limit.

The sponsorship limit is set as follows:

Upon registration, a sponsor receives an initial limit of €1,000. This limit can be increased:

  1. The sponsor carries out an identification procedure. AEQUIFIN offers telephone support for this purpose. After completion of the identification procedure, the sponsorship limit is 10,000 EUR.
  2. For a sponsorship limit above 10,000 EUR an additional requirement is that a security in the amount of the desired sponsorship limit is provided. Security can be provided via:
    • Bank guarantee
    • Prepayment
The sponsor can request the identification procedure in his account settings.

The sponsor can request the deposit of security in his account settings after the successful completion of the identification procedure and an AEQUIFIN employee will carry out the process with him.

Lawyers who meet the legal requirements to work as a lawyer in Germany can register on the AEQUIFIN platform.

When registering, the affiliation to a law firm or law company or other associations of lawyers must be stated.

The lawyer can name areas of law in which he is interested in taking on mandates.

A registered lawyer on the AEQUIFN Platform can receive notification by e-mail of any case enquiries that have not been mandated. He can indicate his interest in accepting mandates via the AEQUIFIN platform (see: Using the Platform - 1.a). For his mandated cases, he prepares the information basis for the sponsors in a Case Concept (see: Using the Platform - 2.).

After receiving the required sponsorship amount, the registered lawyer pursues the litigation objective. He acts independently on the basis of his Case Concept and is responsible for the use of the sponsorship funds (see: Using the Platform - 6.).

After registering on the AEQUIFIN platform, the litigant can submit a case enquiry. This can be done by filling out the online questionnaire under "Submit Case Enquiry".

After an internal preliminary examination by the AEQUIFIN platform, lawyers registered on the AEQUIFIN platform are automatically informed of the case enquiry if the litigant agrees. If they are interested in taking on the case, they will contact the litigant via the AEQUIFIN platform.

The litigant chooses which lawyer registered on the platform he/she mandates for the case. The completion of a mandate agreement with a lawyer registered on the AEQUIFIN platform is a prerequisite for the further processing of a case.

The lawyer registered for the case on the AEQUIFIN platform creates the information basis for the sponsors in a Case Concept. At this point, the client's details are checked and the case strategy is defined. The registered lawyer is responsible for the correctness, completeness and anonymisation of the Case Concept.

In this case, an internal preliminary examination by AEQUIFIN is not necessary.

The lawyer registered for the case on the AEQUIFIN platform creates the information basis for the sponsors in a Case Concept. At this point, the client's details are checked and the case strategy is defined. The registered lawyer is responsible for the correctness, completeness and anonymisation of the Case Concept.

The Case Concept contains:

  • Executive summary
    The executive summary contains essential information on the case, including an assessment of risks and opportunities. Personal data is treated in accordance with the rules of press law and anonymised if required or at the request of the platform participants.
  • Objective of the case
    In the case concept, the objective of the case must be stated as precisely as possible:
    1. In cases where litigants have a financial objective, this objective is the amount of the claim asserted against or defended against the opposing party.
    2. In cases without a financial objective, i.e. if no concrete economic success can be expected for the litigant, 0 must be indicated - e.g. in the case of an action for injunction.
    3. If the objective of the case has an economic content, but the possible success of the case cannot be clearly determined (e.g. if the objective of the case is the surrender of an item or an object), the expected value is used as the basis for calculating the sponsors' share of the success of the case (cf. expected value). In this case, no value is given for the “litigation objective”.
  • Expected value
    The expected value is the financial value of the claim to be asserted or rejected which the litigant, in consultation with his lawyer, considers to be realistically enforceable in consideration of an opportunity/risk scenario and taking into account comparison scenarios, including the risk of enforcement. If the success of the proceedings is below the expected value, the AEQUIFIN Sponsor Protection applies (see: Using the Platform - 5.d.). The expected value always serves as the basis for calculating the sponsors' share in the success of the proceedings if the liquidation proceeds from the success of the proceedings cannot be calculated (cf. "litigation objective"). In this case, the expected value can be freely determined. If the litigation objective or an expected value can be named, but sponsors are not to participate in the success of the proceedings, this can be done by determining the Litigant Quota (cf. offer of the litigant) in the AEQUIFIN Quota Balancing (see: Using the platform - 5.) as 0%.
  • Required sponsorship amount
    The required sponsorship amount includes all costs that are to be expected for the legal enforcement of a case through all instances. This includes, but is not limited to:
    • Costs of proceedings and court costs until a legally binding decision has been reached (i.e. for all instances of the respective jurisdiction).
    • Lawyer's fees
    • Expert opinion and expert costs
    • Enforcement costs
    • Trustee fees and administrative costs of the litigant’s registered lawyer
    • Fees to be paid to AEQUIFIN
    • Advertising costs for this case
  • Litigant's offer ("The litigant offers")
    The litigant can offer a percentage of the litigation proceeds (Litigant Quota) if the case wins (see “Using the Platform” - 8.a). If the objective of the case is not clearly a financial claim, e.g. if the objective of the case is the surrender of an item or an object, then the objective of the case is not determined in the Case Concept by the litigant's lawyer. In these cases, the expected value is the basis for calculating the sponsors' percentage share of the proceeds. Even in the case of a settlement or partial success of the process, the full amount of the expected value is the basis for calculating the sponsor's share of the proceeds. After the sponsors have been informed about the case on the AEQUIFIN platform, the offered participation in the success of a case can only be increased, but not decreased.
  • Duration of the AEQUIFIN Quota Balancing
    The duration is the period of time agreed with the AEQUIFIN platform within which sponsorships can be submitted. The time specified in the Case Concept applies. If during the specified time of the AEQUIFIN Quota Balancing less qualified sponsorships are submitted than the required sponsorship amount, the AEQUIFIN Quota Balancing was not successful and sponsorship agreements will not be drawn up.
  • Minimum sponsorship
    The minimum sponsorship is the minimum amount for an individual binding sponsorship offer by a sponsor. The amount of the minimum sponsorship is determined by the litigant's lawyer.
  • Data room for documents
    Sponsors have access to important documents in a protected data room managed by the registered lawyer for the case. The lawyer decides whether a confidentiality agreement is necessary.
  • Information on own funds of the litigant which are not part of the required sponsorship amount
  • Information on the credit standing of the opposing party
  • Information on the trustee who receives, administers and distributes the funds to be paid in connection with the dispute and his trustee conditions
  • Transaction Period information (possible 20-day waiting period before sponsor payments are made)
  • Information on tax treatment of sponsorships
    AEQUIFIN does not provide any legal or tax advice. The litigant's lawyer may, as a matter of principle, give his opinion on the tax aspects of a sponsorship. In certain cases, for example, the litigant may be entitled to issue a donation receipt. Details must be given in the case concept. However, sponsors should always ask their tax consultant about the tax treatment of a sponsorship.
  • Further information / Advertising / Videos
    The Case Concept can also contain additional information about the case, such as videos and content with an advertising character.

After completion of the case concept, the lawyer confirms that the case is complete and correct and releases it to AEQUIFIN for publication and brokerage on the AEQUIFIN platform.

If the case complies with the ethical guidelines of the AEQUIFIN platform, it will be released by AEQUIFIN on the AEQUIFIN platform with the corresponding case concept. If a case does not comply with AEQUIFIN's ethical guidelines it will be rejected by the AEQUIFIN Advisory Board.

After approval by AEQUIFIN, the case will be published on the AEQUIFIN platform and interested sponsors will automatically be informed of the case by e-mail.


IMPORTANT:

AEQUIFIN does not review the data for lawfulness, accuracy, completeness or any other legal aspect.

Before starting the AEQUIFIN Quota Balancing, sponsors have the opportunity to ask questions on the AEQUIFIN platform that arise from their analysis of the information on the case. The questions will be forwarded by e-mail to the registered lawyer for the case.

The registered lawyer answers to the sponsor's questions will be published in the case concept. During the Q&A phase, the registered lawyer will provide further documents requested by the sponsors if he deems them relevant.

After the Q&A phase, the AEQUIFIN Quota Balancing begins.

For cases with financial objectives, the AEQUIFIN Quota Balancing determines a uniform quota with which all sponsors participate in the success of the case (liquidation proceeds) - the AEQUIFIN quota.

If no financial goal is pursued, the litigant receives pro bono sponsorships.

The AEQUIFIN Quota shows the variety of motives of the platform users.

The AEQUIFIN Quota can be zero if sponsors simply want to help or clarify a legal issue.

The AEQUIFIN Quota can be very high if the litigant wants to enforce their rights despite a high risk.

The AEQUIFIN Quota also applies when a legal matter is resolved through out-of-court settlement or mediation.

With the publication of a case (see Use Platform - 3.), the litigant declares through his registered lawyer the legally binding acceptance of the offers made by sponsors during the AEQUIFIN Quota Balancing, provided that these offers do not exceed the currently valid Litigant Quota.

The AEQUIFIN Quota Balancing begins at the end of the Q&A phase and has a term defined in the case concept. During this period, sponsors can submit their sponsorship on the AEQUIFIN platform in the corresponding input field.

Sponsors can submit bids as Best Sponsorship or Limit Sponsorship.

With Best Sponsorship, the sponsor offers a sponsorship amount without a specific claim for participation in any financial proceeds if the case is successful.

If an AEQUIFIN Quota greater than 0% is determined in the AEQUIFIN Quota Balancing, the sponsors will receive a share of financial proceeds if the case is successful in the amount of the AEQUIFIN Quota (see Use Platform - 5.b).

In cases with no economic benefit, i.e. no expected value for the litigant (see Use Platform - 2.) or in cases with an AEQUIFIN Quota of 0%, i.e. clarification of a legal issue, the sponsorship has the character of a donation. (see Use Platform - 9.).

With a Limit Sponsorship, the sponsors determine their sponsorship amount with a demand for a minimum participation in the financial proceeds if the case is successful (Minimum Quota).

In order to increase the likelihood of a successful AEQUIFIN Quota Balancing being achieved

  • a sponsor can accommodate the litigant and reduce their Minimum Quota. An increase is not possible.
  • the litigant can accommodate the sponsors and increases the Litigant Quota via his registered lawyer (see Use platform - 2.). A reduction is not permissible.
Sponsorships cannot be withdrawn or the sponsorship amount changed.

A Best Sponsorship is easy to handle and the sponsor receives the AEQUIFIN Quota determined in the AEQUIFIN Quota Balancing process. After the sponsorship has been submitted, the sponsor can see whether his sponsorship has qualified. Subsequent underbidding is excluded. However, the AEQUIFIN Quota determined at the end of the term may be lower than expected.

The less a case is to be supported for financial reasons, the more Best Sponsorship can be recommended.

A Limit Sponsorship ensures a desired minimum participation in the success of a case, it can however be underbid by other sponsorships until the end of the AEQUIFIN Quota Balancing and should therefore be monitored.

The AEQUIFIN Quota Balancing is designed in such a way that the litigant can receive a reasonable sponsorship. Limit sponsors pursue their economic benefits. They therefore analyse legal and economic opportunities and risks and thereby support the litigant in doing this. They determine the amount of the AEQUIFIN quota.

The more a case is supported for financial reasons, the more Limit Sponsorship is recommended.

If a sponsor pursues his own financial benefit, a high Minimum Quota is optimal for him.

An AEQUIFIN Quota of zero can also be optimal, e.g. if his sponsorship clarifies an important legal issue for him, on which no court decision could be made without his financial support.

The clearer the idea about the intended financial participation in the success of a lawsuit is, the more advisable it is to use the Minimum Quota. This is because the settlement is based on the AEQUIFIN quota. If this is higher than the sponsor's Minimum Quota, he receives a share of the proceeds from a successful case at this higher rate rather than his Minimum Quota. Tactics are not necessary.

A sponsorsip offer can be underbid after submission. A sponsor should observe his bid and, if underbid, reduce his Minimum Quota where appropriate. If he subscribes to the case, he can be automatically informed about new bids from other sponsors.

If a sponsor's Minimum Quota is higher than the Litigant Quota, his sponsorship offer will only be considered if the litigant increases his quota in the course of the AEQUIFIN Quota Balancing or the sponsor lowers his Minimum Quota so that it is less than or equal to the Litigant Quota.

By providing their own funds, litigants can demonstrate their commitment to their own case or close a sponsorship gap after the AEQUIFIN Quota Balancing has expired.

The litigant's own funds are disclosed in the case concept. The registered lawyer for the case takes these own funds into account when calculating the required sponsorship amount.

If insufficiently qualified sponsorships have been submitted by the specified end of the AEQUIFIN Quota balancing, the litigant can cover the shortfall himself. The prerequisite is that the Litigant Quota is above the highest sponsor quota at the end of the AEQUIFIN Quota Balancing. The payment of the missing amount by the litigant is quota-neutral for the sponsors.

The AEQUIFIN Quota Balancing does not end with the achievement of the required sponsorship amount but runs to the end of the specified term. This is to ensure that a case can be examined by sponsors for a sufficiently long time and also allows sufficient time to determine a fair quota.

When the required sponsorship amount has been reached, the bar in the case overview is displayed completely in green and the first AEQUIFIN Quota reached is shown. The field "Litigant offers", no longer shows a quota. (The value is still displayed in the AEQUIFIN Quota Balancing table.)

The current AEQUIFIN Quota can still be reduced before the AEQUIFIN Quota Balancing expires. After expiration, the final AEQUIFIN Quota will be displayed (see Use Platform - 5.b) and the sponsors will automatically be informed by e-mail.

At the specified end of the AEQUIFIN Quota Balancing, sufficient qualified sponsorships must have been submitted. Otherwise, no sponsorship agreements will be made.

The sponsorships qualify according to their advantage for the litigant. The sponsorships with the lowest Minimum Quota are the most advantageous. The Best Sponsorships are set with a Minimum Quota of 0 and thus have the highest advantage for the litigant.

The litigant offer and the sponsorships submitted are compared in the AEQUIFIN Quota Balancing table.

On the right, the sponsorships are listed in ascending order according to the amount of the requested quota. Equally high quotas are listed according to the time of submission ("first come, first serve").

The displayed amounts can be grouped and viewed in detail by clicking on the "+" sign to the right of the quotas.

On the left side, the litigant offer is shown below the sponsorship that fulfill the following two conditions:

  1. The required Minimum Quota corresponds to the Litigant Quota or is lower.
  2. The sum of these sponsorships does not exceed the required sponsorship amount.
Since these sponsorships request a lower participation in the proceeds from successful case than the litigant offers or they accept the quota offered by the litigant, these offers qualify at this point for the realization of a sponsorship agreement.

Already qualified sponsorships can still be underbid until the end of the AEQUIFIN Quota Balancing. In this case, the sponsor will automatically be informed by e-mail.

The AEQUIFIN Quota corresponds to the highest Minimum Quota of all qualified sponsorships that are required at the end of the AEQUIFIN Quota Balancing to fully finance the required sponsorship amount. All qualified sponsorships receive this quota - the Best Sponsorships as well as all sponsorships with a lower requested Minimum Quota.

Sponsors must be able to rely on the expected value stated by the litigant's registered lawyer, as they are guided by this expected value.

A settlement could lead to a financial success of the case below the expected value. However, the sponsors have no say in a settlement.

The AEQUIFIN Sponsor Protection is intended to counteract the overstatement of the expected value. It is also intended to compensate the sponsors for their lack of involvement in the decision-making process.

Therefore, the higher the required sponsorship amount is and the further the proceeds from a successful case are below the expected value (Effective Quota) the more the Effective Quota increases in favour of the sponsors in the distribution of the profit.

IMPORTANT:

Before submitting a sponsorship offer, interested sponsors have the opportunity to have the Effective Quota calculated for possible scenarios in the sponsorship input mask.


The AEQUIFIN Sponsor Protection is calculated according to the following formula:

Effective Quota = (RS + NS * (1 - LP/EV) + (LP - NS - NS * (1 - LP/EV)) * AQ) / LP

RS: Required SPonsorship Amount
EV: Eexpected Value
LP: Liquidation Proceeds
AQ: AEQUIFIN Quota

With the AEQUIFIN Sponsor Protection, the sponsors' share can at most correspond to the liquidation proceeds because the litigant is not required to make additional capital contributions. In this case, the litigant's share is 0.

Within the sponsor protection, sponsors do not fare better than they would if the expected value were reached. Thus, the maximum sponsors' share can only reach the AEQUIFIN Quota multiplied by the expected value.


Example to illustrate the AEQUIFIN Sponsor Protection for liquidation proceeds below the expected value:

A case with an expected value of 8,000,000 EUR and a required sponsorship amount of 1,000,000 EUR is settled at 3,200,000 EUR. The AEQUIFIN Quota was calculated as 50% in the AEQUIFIN Quota Balancing.

The sponsors' share of the liquidation proceeds is calculated as follows:

  1. Liquidity preference in the amount of the required sponsorship (RS): 1,000,000 EUR
  2. Sponsor protection amount = 1,000,000 EUR (RS) * (1 - (3,200,000 EUR (LP) / 8,000,000 EUR (EV))) = 600,000 EUR
  3. Adjusted liquidation proceeds = 3,200,000 EUR - 1,000,000 EUR - 600,000 EUR = 1,600,000 EUR
  4. Sponsors' share of adjusted liquidation proceeds = 50% (AQ) * 1,600,000 EUR = 800,000 EUR
  5. Total sponsors' share = 1,600,000 EUR + 800,000 EUR = 2,400,000 EUR
  6. Effective Quota = 2,400,000 EUR / 3,200,000 EUR = 75 %

When the AEQUIFIN Quota Balancing has been successfully completed, sponsorship contracts are drawn up between the litigant, the registered lawyer and the individual sponsors of the qualified sponsorships.

The sponsorship contract essentially obliges the litigant and his registered lawyer to use the sponsorship received exclusively for the enforcement of the legal matter described and to pay the AEQUIFIN Quota in the event of litigation success.

The obligation of the sponsors is essentially limited to the payment of the sponsorship amount.

Details such as the registered lawyer's duty to provide information or the disclosure of conflicts of interest by sponsors are regulated in the General Terms and Conditions of the AEQUIFIN platform.

AEQUIFIN does not receive sponsorship payments. Payments are to be made exclusively to the specified trustee account.

The sponsor receives a payment request from the registered lawyer or AEQUIFIN regarding the payment obligations of the sponsorship. It is possible that a transaction period was specified in the case concept. This is a possible 20-day waiting period before the registered lawyer or AEQUIFIN sends a payment request.

After transfer to the trustee account by the sponsor, the registered lawyer or AEQUIFIN will confirm receipt of payment.

After receiving the required sponsorship amount, the litigant’s registered lawyer pursues the objective of the case. He acts independently on the basis of his Case Concept and is responsible for the use of the sponsorship funds.

The registered lawyer informs the involved sponsors about the relevant developments and the completion of the proceedings in accordance with the AEQUIFIN platform requirements. He uses a secure communication forum on the AEQUIFIN platform and, if necessary, provides documents in the secure data room managed by him.

If the required sponsorship amount is not sufficient, the litigant’s registered lawyer is obliged to determine the need for additional financing and to initiate the AEQUIFIN Supplementary Financing process.

The AEQUIFIN Supplementary Financing process is a procedure that protects the interests of the sponsors and is intended to prevent a case from failing due to a lack of supplementary funds. It takes into account the fact that sponsors are generally less able to assess the chances of success of a case. The litigant, together with the registered lawyer, has an advantage here.

The sponsors involved in the initial financing round will be asked first whether they are willing to take part in the supplementary financing process in accordance with their current share of the required sponsorship amount and under the same conditions regarding the AEQUIFIN quota.

If all involved sponsors agree to supplementary financing within the set period and the promised required sponsorship amount is paid no later than seven days after expiry of this period, the supplementary financing sponsorship is completed on unchanged terms.

If option a. does not occur, the litigant's registered lawyer is obliged to offer AEQUIFIN Supplementary Financing Quota Balancing on the AEQUIFIN platform.

In the AEQUIFIN Supplementary Financing Quota Balancing, an AEQUIFIN Supplementary Financing Quota is determined with which, in the event of success, the supplementary financing sponsors are given priority in the liquidation proceeds. In order to rule out a possible blockage of supplementary financing, the litigant cannot specify a quota in the AEQUIFIN Supplementary Financing Quota Balancing.

After deduction of the profit participation of the supplementary financing sponsors and the AEQUIFIN remuneration, the remaining liquidation proceeds from the closed case are distributed between the original sponsors and the litigant in accordance with the rules of the original AEQUIFIN Quota Balancing in the proportion to the AEQUIFIN quota.

If financial objectives are achieved, the trustee will distribute the liquidation proceeds proportionately to the sponsors and the litigant in accordance with the provisions of the AEQUIFIN Quota Balancing, the AEQUIFIN Sponsor Protection and the AEQUIFIN Supplementary Financing agreement.

The "liquidation proceeds" include:

  • any financial benefit which the litigant receives as a result of a judicial or administrative decision, a court or out-of-court settlement, a mediation result, an acknowledgment or any other benefit with regard to the dispute or the facts presented in the Case Concept
  • Sponsorships of the sponsors that have not yet been used at the time of revenue distribution minus the proceeds from any claims for reimbursement of costs (e.g. reimbursement of court costs and lawyers' fees).
If reimbursement proceeds can be obtained, they will be divided between the sponsors according to their share of the required sponsorship. The litigant and AEQUIFIN will not receive any reimbursement.

The sponsors will receive their share of the liquidation proceeds and the cost reimbursement proceeds minus the AEQUIFIN performance fee from the trustee after approval by the AEQUIFIN platform and the registered lawyer of the case.

Subsequently, the trustee will pay the litigant his share of the liquidation proceeds minus the AEQUIFIN performance fee.

In the event that the litigant is unsuccessful, the unused sponsorship will be refunded by the trustee to the sponsors in proportion to their respective share of the required sponsorship amount.

There is no further obligation on the part of the litigant to reimburse the sponsors.

The litigant's registered lawyer has an obligation to his client and proceedings may end prematurely in the case of important events. Please note the General Terms and Conditions of the AEQUIFIN platform.

The tax treatment of sponsorships on the AEQUIFIN platform can be different for each sponsor. The litigant's registered lawyer may provide information on this in the Case Concept.

In certain cases, sponsorships may be tax-deductible donations if the AEQUIFIN Quota is zero. The registered lawyer can provide information on the possibility of tax deductibility in the Case Concept.

Under certain circumstances, a loss from a sponsorship may be tax deductible.

AEQUIFIN is not allowed to provide legal or tax advice. AEQUIFIN employees are not permitted to assess tax information provided by lawyers registered on the platform.

In general, sponsors should assume that a financial stake in the success of a lawsuit is taxable and should always consult their own tax advisor on the tax treatment of a sponsorship.

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