Liechtenstein law contains no explicit provisions on commercial legal financing. Within the scope of contractual freedom, a legal finance contract can be concluded either:
- without assumption of claims; or
- by assumption of the claims and subsequent assertion in the investor’s own name and account.
In addition to legal funding, many people and legal entities have legal expenses insurance.
The principles of financing are similar in the private and commercial sectors. In the private sector, the statutory regulations on consumer protection must be observed. Furthermore, contingency agreements, insofar as they concern contracts with lawyers, are inadmissible in Liechtenstein.
- Single case fees and expenses;
- Portfolio fees and expenses;
- Monetisation of claims;
- Monetisation of judgments and awards; and
- Other.
In general, legal funding in Liechtenstein need not be disclosed. The leading litigation-financed cases of the last few years mainly concerned contractual disputes in the consumer sector, which were brought in the course of a class action. However, litigation financing is also possible in other areas of law. Financing through legal protection insurance is particularly relevant for litigation and the assertion of claims for damages.
The prohibition of contingency agreements for members of the legal profession (lawyers, notaries, professional trustees, tax advisers and auditors) essentially excludes them from participating in litigation financing. In contrast, commercial providers can assume a share in the success and financing of litigation costs. There are very few providers in Liechtenstein itself. However, due to the country’s very close economic, cultural and especially legal ties with Austria and Switzerland, companies/start-ups from these countries in particular are active on the Liechtenstein market. In addition to these providers, foreign insurance companies offer legal expenses insurance policies that provide for litigation financing.
Apart from prohibition of contingency agreements for lawyers (see question 1), the law in principle imposes no restrictions on the types of litigation that may be financed by third parties. The Liechtenstein market for litigation financiers still offers potential for development, apart from the instrument of legal expenses insurance.
Beside isolated special provisions such as the prohibition of contingency agreements for members of the legal profession (lawyers, notaries, professional trustees, tax advisers and auditors), there are no general norms regulating the financing of litigation. Apart from that, general contract law, consumer protection law and, in the case of insurance, insurance law will apply.
The enforcement and observance of the professional code of conduct of lawyers are afforded great importance by the Bar Association and the Princely Higher Court. In this regard, these institutions have disciplinary authority.
The Trade Licensing Authority and the Administrative Court supervise compliance by tradespeople with the provisions of trade law.
The supervision of insurance companies is the responsibility of the Financial Market Authority.
Members of the legal profession (lawyers, notaries, professional trustees, tax advisers and auditors) are prohibited by law from accepting promises of a share in any future proceeds of a lawsuit in order to uphold their professional honour and prevent conflicts of interest. This is also the reason why legal finance may not generally be offered by legal professionals.
Legal finance is recognised as a legitimate way of financing proceedings in Liechtenstein case law. In 2020, the Liechtenstein Supreme Court expressly stated in this regard that the way in which one party of the proceedings finances a lawsuit is “simply none of the other party’s business” (OGH, 6 March 2020, 08 CG.2018.144, LES 2020, 87).
It is possible to structure a contract of legal funding as a loan agreement. In this respect, the rules on consumer credit (set out in the Consumer Credit Act) will apply accordingly. The corresponding regulatory provisions on the part of the lenders must also be observed. However, such arrangements (ie, loans for the purpose of legal funding) are not common in Liechtenstein.
The statutory prohibition on contingency agreements excludes all members of the legal profession from such agreements.
Contingency fees are not permitted in Liechtenstein.
Such agreements are not permitted in Liechtenstein due to the prohibition on contingency agreements.
Apart from the prohibition on contingency agreements, all instruments which are based on the principles of general civil law and do not violate good morals are admissible and applicable. This is conditioned by the freedom of contract.
No. According to Article 36 of the Liechtenstein Lawyers’ Act, only lawyers registered with the Liechtenstein Bar Association may hold shares in law companies and participate in the profits.
External litigation financing outside of legal expenses insurance has played a minor role in Liechtenstein to date. By contrast, it can be assumed that many claims are pursued on the basis of coverage by the insurance companies.
Ways to effectively reduce the financial risk of legal actions are discussed with the client within the scope of the lawyer’s advisory duties on a regular basis. In this respect, it is also common for lawyers to take over, for example, the contact and settlement with the legal protection insurer.
By way of the transfer of claims to a single plaintiff, several related claims may be asserted in one action, even where the facts giving rise to the right are not identical. Unlike in a class action suit, however, the individual claimants must themselves become active and transfer the claims before the suit is filed. The respective form and distribution of the proceeds are regulated within the framework of contractual freedom and the accompanying provisions of consumer protection law and good morals.
Due to the country’s relatively small size, class actions do not arise frequently in Liechtenstein. The individual assertion of claims is common in Liechtenstein.
Since legal funders act in a commercial manner by nature and rely on the generation of profits, the main factor evaluated is the likelihood of success. In this respect, they are also dependent on the competent advice of lawyers. The fact that the Liechtenstein legal area is very small and that very few legal funders have expertise in Liechtenstein law makes it almost inevitable that Liechtenstein lawyers will be called in to assess the prospects of success.
Experience shows that it is important to have a competent and, above all, easily accessible contact person. The resulting mutual understanding facilitates communication and the handling of the claim, and ultimately boosts the prospects of success.
In general, a legal funder is informed of the facts relevant to the case. The financier then examines the claim, issues the corresponding cost coverage and submits an offer for litigation financing. As a rule, no legal action should be taken before this cost coverage has been granted, as this is only covered by the cost coverage after appropriate subsequent approval. This is usually granted if the lawyer’s intervention was necessary to secure the claim.
Legal funders often actively solicit claimants in potential prominent class action cases.
The typical terms of a legal finance agreement are:
- the extent of the legal costs and fees covered;
- the involvement of the legal funder (ie, information and documentation obligations ensuring that the legal funder is always fully aware of the current developments of the case);
- the legal funder’s entitlements; and
- support services provided by the legal funder (eg, assisting with commercial and strategic issues).
There are no special regulations. In general, the rules of contract law must be observed, according to which a contract may not be contrary to good morals.
As the financing of legal costs is a contract under private law, such constellations are conceivable. The Liechtenstein legal system contains no special provisions in this regard. Accordingly, the consequences (under contract law) must be considered individually on a case-by-case basis.
There is no requirement for court approval of legal funding.
In its Decision OGH 08 CG.2018.144 (see question 2.5), the Supreme Court clarified most of the issues surrounding litigation funding in the highest courts. In this respect, there are no expected uncertainties or associated litigation risks.
There are no statutory obligations that provide for a mandatory assumption. Since legal financing is a matter for the individual party, a counterclaim primarily affects the respective litigant. Of course, agreements can be made in the internal relationship between the financier and the litigant.
Yes, Liechtenstein law allows for the acquisition of claims to be enforced by legal action.
Claims are part of the realisable insolvency estate and can be sold by the insolvency estate. This is done by means of a judicial auction.
Final judgments as the basis for a claim can be disposed of in the same way as causes of action in accordance with the general provisions of civil law.
As there are no legal provisions that limit the admissibility of legal financing agreements, such an agreement may, in principle, also stipulate that the litigant must instruct a certain law firm to conduct the litigation. The outer limit of the admissibility of such contractual provisions is Section 879 of the General Civil Code, pursuant to which contractual provisions, may not be contrary to good morals.
This depends on whether the funder only provides the financial resources for the proceedings (classic third-party litigation funding) or has the claims to be asserted in the proceedings transferred to it by the party and asserts them in its own name and for its own account. In the latter case, the funder is a party to the proceedings and thus can also attend and/or participate in court proceedings. In the former case, attendance in court proceedings is generally possible only if the public is not excluded by court order, as the funder in this case is to be viewed as a third party which is formally not involved in the proceedings.
In principle, such influence can also be explicitly regulated in the underlying third-party legal financing agreement. Thus, the answer to question 7.1 also applies here.
As outlined in questions 7.1 and 7.3, the possibilities to influence the litigation can be regulated in the legal financing agreement, to the extent that the respective clauses are not contrary to good morals.
In its Decision 08 CG.2018.144 (see question 2.5), the Supreme Court clarified that the financing is a matter for the party alone and thus need not be disclosed to anyone.
A legal finance agreement is a private law agreement in which, in general, no lawyers are involved as parties. Therefore, only contractual confidentiality obligations can be concluded.
No. Liechtenstein's attorney-client privilege, which is comparable to the work product rule, only covers communications between attorneys and their clients.
Fee-splitting does not affect legal funding options.
No. Since these are doctrines practised in common law jurisdictions, they are not directly applicable in Liechtenstein. However, in accordance with the general principles of contract law, it is important to point out that contracts must not be contrary to good morals. If a contractual provision is contrary to good morals, it is deemed null and void pursuant to Section 879 of the General Civil Code.
In Liechtenstein, there are no legal restrictions that limit the admissibility of litigation funding to certain types of proceedings.
In general, Liechtenstein has a very efficient court system. The median time from filing a lawsuit to receiving a first-instance judgment is 12 months. In addition, it is possible to reach a settlement at any time during the proceedings.
The Liechtenstein Code of Civil Procedure obliges the parties to attempt to reach a settlement at the beginning of the proceedings. In any case, this provision serves to bring about inexpensive and, above all, quick solutions to conflicts and, as such, is actively used in practice.
It is possible to obtain an order that forces the other party to produce certain types of documents in the course of a civil law procedure under certain requirements. The production of the document cannot be refused if:
- the opponent has itself referred to the document for the purpose of providing evidence in the proceedings;
- the opponent is obliged under civil law to surrender or produce the document; or
- the content of the document is common to both parties.
A party may also request the court to order a third party to provide a specific document if:
- that third party is obliged by law to hand over the document in accordance with the provisions of civil law; or
- the document is, in terms of its content, of joint use to the parties (eg, a contract).
Unlike an order addressed to a party to the litigation itself, the court order addressed to a third party is enforceable.
Appeals against partial judgments rendered in the course of the trial (dismissal of a part of the claims) are admissible.
Appeals against first-instance judgments are not uncommon. In this respect, the period until a final judgment is rendered can be up to two to three years.
In general, judgments impose an obligation to pay a sum of money within four weeks of the judgment becoming final. Interim injunctions to secure a claim are permissible. If the judgment is not complied with, the court can take appropriate enforcement measures within weeks through a rapid procedure.
In the case of judgments that may be subject to appeal, enforceability commences at the earliest upon the expiry of the unused period for appeal. Appeals against first-instance decisions are admissible. However, in the case of actions for less than CHF 5,000 (small claims appeals), the grounds for appeal are limited to:
- grounds for nullity (eg, incorrectly constituted court, unjustified exclusion of the public);
- procedural irregularities;
- incorrectness of the case file;
- incorrect determination of the facts due to incorrect evaluation of evidence; or
- incorrect legal assessment.
In principle, the losing party must reimburse its opponent for all necessary legal costs. However, if each party prevails in part and is unsuccessful in part, the costs:
- will be offset against each other, so that neither party is reimbursed for its costs; or
- will be apportioned proportionately.
This does not apply to court fees or fees for experts and witnesses. With regard to these costs, each party to the proceedings is entitled to reimbursement of the costs of the proceedings to the extent of its actual success in the proceedings.
The legal costs will initially be borne by each party itself. The claim for reimbursement of costs will be asserted by submitting a list of costs to the court. The court will then decide on the reimbursement of legal costs by means of an order, which is included in the judgment.
The costs to be reimbursed will be paid to the party within the framework of the court’s decision on costs. In doing so, the court will award the costs that are necessary and appropriate for the prosecution of the case. However, the reimbursement of costs is in principle granted only in proportion to the winning percentage. If, for example, an amount of CHF 50,000 is claimed, but the judgment only awards an amount of CHF 25,000, only half of the costs will be reimbursed.
This depends on whether the litigation funder has had the party’s claim assigned to it and is asserting the claim in its own name and for its own account in the proceedings. As the litigation funder is then to be regarded as a (regular) party to the proceedings, the court may also oblige it to reimburse costs (in accordance with the principles outlined in questions 10.1 and 10.2). However, if the litigation funder solely provides the financial means for the proceedings/litigation without having the party’s claim assigned to it, it is not a party to the proceedings and therefore cannot be obliged to reimburse costs.
Foreign plaintiffs/appellants or natural persons not domiciled in Liechtenstein must, in principle, deposit security for costs if security for the costs of the proceedings cannot otherwise be guaranteed (eg, enforceability of the decision on costs in the country of domicile). The same applies to legal entities if the legal entity cannot show assets in the amount of the presumed legal costs that are subject to enforcement by a court decision.
The type of funding has no influence on the deposit of security for costs. Regardless of whether funded litigation is involved, the deposit of a security for costs may be applied for in the cases outlined in question 10.4.
The insurance companies operating under a Liechtenstein licence do not offer legal expenses insurance at the present time. Legal protection insurance services are provided by foreign insurance companies (mostly Swiss). In this respect, Liechtenstein insurance law has no experience with or provisions on ATE legal expenses insurance.
ATE insurance is not common in Liechtenstein. In this respect, the corresponding empirical values are also lacking.
In Liechtenstein, legal protection insurance policies that cover the costs of a lawsuit are widely available at reasonable rates. However, these policies may contain certain exclusions from coverage. These policies contribute to the rule of law by ensuring low-threshold access to legal assistance for the broad mass of the population while at the same time avoiding the risk of costs.
Legal finance is regularly used in Liechtenstein legal practice. However, currently there are very few Liechtenstein-based litigation funders, which is why commercial litigation funders from abroad are often used to provide the financial resources for proceedings. Since litigation financing agreements are generally not publicly available – after all, they are agreements between private individuals – it is difficult to identify any trends in this regard.
No (legislative) developments in the area of legal finance are expected in the next 12 months.
Legal protection insurance is always recommended and is reasonably priced. However, if legal financing must be used, the facts of the case should already be presented as clearly as possible in order to ensure the most precise possible assessment of the prospects of success and ultimately also of the financing prospects.
