Which terms should an investor understand in a litigation funding agreement?

Five groups. Economics: the commitment, what it can be spent on and the return formula. Priority: the order in which proceeds are paid and any minimum for the client. Control: consent rights on settlement, counsel changes and strategy. Security: liens on the claim and its proceeds. Exit: when the funder can stop funding or terminate, and what is owed then. A fund investor will rarely see the agreements, so ask the manager how these are typically set.

Who controls the case under an LFA?

Usually the client, with consent rights for the funder. Burford says its agreements 'explicitly state that control of litigation and arbitration decision-making remains with the client' except in extraordinary circumstances agreed in advance. Many agreements still restrict settling without consent or changing counsel. The Zerify letter agreement of August 2024, a monetization arrangement rather than a pure LFA, let the adviser conduct licensing and settlement negotiations while the company approved final terms.

Is the funder secured?

Often. Bench Walk took a security interest in Silver Bull's claim, the claim proceeds, related documents and 'rights under any appeal bond or similar instrument.' Williams Industrial's lender agreement, filed with its 2022 10-K, describes a Capital Provision Agreement and a separate Security Agreement dated September 1, 2020, with the capital providers filing UCC financing statements. Security can put the funder ahead of other creditors on the proceeds.

When can the funder walk away?

On the events the agreement defines. After Silver Bull's claim was dismissed, Bench Walk terminated the agreement and Silver Bull wrote off a $192,132 receivable for unreimbursed costs. Burford distinguishes definitive commitments, where failing to fund has adverse consequences such as 'dilution in our returns or the loss of our deployed capital,' from discretionary ones. Read what happens to the client's obligations if the funder stops.

Is the agreement itself confidential or privileged?

Usually confidential, and in many courts not required to be disclosed. Burford's guide says materials prepared for funders are protected as work product in the US and privileged in many other jurisdictions, and that 'the majority of courts do not require disclosure of commercial legal finance arrangements.' Some courts, such as the District of New Jersey, require a disclosure statement, per GAO.

Litigation Funding Agreement

Litigation Finance & Legal Claims

Definition

A litigation funding agreement (LFA), also called a capital provision agreement or third-party funding agreement, is the contract between a funder and a claimant or law firm that sets the funding commitment, the funder's return, the order in which proceeds are paid, control and consent rights, security, representations, and termination. Burford says 'the terms of each asset are bespoke,' and GAO found funders reluctant to share them: six of twelve provided examples with returns, fees and amounts redacted.

Why it matters

The funding agreement is where litigation finance's economics are actually decided: the multiple or percentage, the priority of payment, control, security and what happens if the case goes wrong. Investors in a fund almost never see the agreements, so the manager's description of its typical terms is the only window. The few agreements described in SEC filings show how varied they are: a 3.5x-or-30% formula with a security interest, a time-based ladder from 50% to 1.8x, a cost-plus-15% layer ahead of a 40% fee. Ask the manager which structures it uses and how often, and how it has handled clients who settled early, changed counsel or stopped cooperating.

Common misconceptions

•An LFA is not a standard form, because Burford calls its terms bespoke and the agreements described in SEC filings use very different return formulas.
•The funder does not usually run the case, but consent rights on settlement and counsel can still shape decisions.
•Non-recourse does not mean unsecured, because funders such as Bench Walk take security interests in the claim and its proceeds.
•A commitment is not a guarantee of funding, because agreements let funders stop on defined events and some commitments are discretionary.
•Confidentiality is not universal, because some courts and states require the existence and key terms of funding to be disclosed.

Technical details

Worked example (illustrative): the Bench Walk formula applied to hypothetical numbers

Assume capital outlay of $6.0 million. Option 1: 3.5x = $21.0 million. Option 2: $6.0 million + 30% of proceeds.

Proceeds $15 million: the formula gives $21.0 million, more than the proceeds, so the funder's share is limited to what exists; the client receives nothing unless the agreement says otherwise.

Proceeds $50 million: both options give $21.0 million; the client keeps $29.0 million.

Proceeds $100 million: option 2 gives $36.0 million; the client keeps $64.0 million.

Amounts are hypothetical; only the formula is from Silver Bull's 10-Q.

Terms to find in an LFA

Commitment: amount, permitted uses (fees, costs, corporate expenses), draw conditions.

Return: multiple, percentage, time-based rate, or the greater of several; caps and floors.

Priority: order of payment from proceeds, client minimums, other funders pari passu.

Control: consent to settle, change counsel, withdraw; reporting duties.

Security and exit: liens and UCC filings, termination rights, what is owed on termination.

What AltStreet's reviews and filings show

Bench Walk was entitled to 'a share of any proceeds arising from the Claim ... of up to 3.5x Bench Walk's capital outlay (or, if greater, a return of 1.0x Bench Walk's capital outlay plus 30% of Claim Proceeds),' secured by a security interest in the claim, its proceeds and rights under any appeal bond; it paid $5,925,000 of legal and arbitration costs from September 2023 (Silver Bull 10-Q, July 31, 2026).

AmBase's March 2026 funding agreement with its chief executive (10-Q for June 30, 2026) pays the funder first until it has received the fund amount plus 50% if proceeds arrive by September 30, 2026, plus 1.0x within 12 months of funding, plus 1.5x within 24 months and plus 1.8x after that, with the company receiving the rest.

Zerify 8-K EX-10.1 (August 25, 2024): proceeds go to outside counsel's account under an 'irrevocable pay proceeds agreement'; first approved costs plus 15% a year, second amounts under any litigation funding agreement (up to three times litigation costs, or a fee share up to 15% higher), third 40% of the remainder to the adviser.

Burford's 2025 10-K says a basic single-case deal typically returns its deployed capital plus 'one or a combination' of a time-based return such as an interest rate, a multiple of deployed capital 'that may increase over time,' and a percentage of the net realization 'that may increase or decrease over time or may depend on the size of the total resolution amount'.

Questions for a fund manager about its agreements

Which return structures do you use, and how often each?

Do clients get a minimum share of proceeds before you are fully paid?

What consent rights do you take, and have you ever exercised them to block a settlement?

Are you secured on the claim and proceeds, and do lenders to the client rank ahead?

When have you terminated an agreement, and what did the client owe?

How investors apply the term

Investors usually apply this term by tying the definition back to the controlling documents and then asking which cash flows, rights, restrictions, or valuation assumptions it changes. A useful review looks at the term alongside fees, leverage, liquidity, reporting frequency, and manager discretion rather than treating it as a standalone concept.

The practical diligence test is simple: identify who benefits if the assumption is wrong, who has control when conditions change, and what evidence the investor receives after closing. Terms that cannot be reconciled to documents, cash movements, and monitoring data should be treated as marketing shorthand until proven otherwise.

Frequently asked questions

Which terms should an investor understand in a litigation funding agreement?: Five groups. Economics: the commitment, what it can be spent on and the return formula. Priority: the order in which proceeds are paid and any minimum for the client. Control: consent rights on settlement, counsel changes and strategy. Security: liens on the claim and its proceeds. Exit: when the funder can stop funding or terminate, and what is owed then. A fund investor will rarely see the agreements, so ask the manager how these are typically set.
What does a real return formula look like?: Silver Bull Resources' agreement with Bench Walk Advisors, described in its 10-Q for July 31, 2026, entitled Bench Walk to 'a share of any proceeds arising from the Claim ... of up to 3.5x Bench Walk's capital outlay (or, if greater, a return of 1.0x Bench Walk's capital outlay plus 30% of Claim Proceeds).' AmBase's 2026 agreement with its chief executive uses time-based tiers that rise from the fund amount plus 50% to plus 1.8x the longer recovery takes.
Who controls the case under an LFA?: Usually the client, with consent rights for the funder. Burford says its agreements 'explicitly state that control of litigation and arbitration decision-making remains with the client' except in extraordinary circumstances agreed in advance. Many agreements still restrict settling without consent or changing counsel. The Zerify letter agreement of August 2024, a monetization arrangement rather than a pure LFA, let the adviser conduct licensing and settlement negotiations while the company approved final terms.
Is the funder secured?: Often. Bench Walk took a security interest in Silver Bull's claim, the claim proceeds, related documents and 'rights under any appeal bond or similar instrument.' Williams Industrial's lender agreement, filed with its 2022 10-K, describes a Capital Provision Agreement and a separate Security Agreement dated September 1, 2020, with the capital providers filing UCC financing statements. Security can put the funder ahead of other creditors on the proceeds.
When can the funder walk away?: On the events the agreement defines. After Silver Bull's claim was dismissed, Bench Walk terminated the agreement and Silver Bull wrote off a $192,132 receivable for unreimbursed costs. Burford distinguishes definitive commitments, where failing to fund has adverse consequences such as 'dilution in our returns or the loss of our deployed capital,' from discretionary ones. Read what happens to the client's obligations if the funder stops.
Is the agreement itself confidential or privileged?: Usually confidential, and in many courts not required to be disclosed. Burford's guide says materials prepared for funders are protected as work product in the US and privileged in many other jurisdictions, and that 'the majority of courts do not require disclosure of commercial legal finance arrangements.' Some courts, such as the District of New Jersey, require a disclosure statement, per GAO.