Litigation financing in Venezuela: innovation in a complex market
Litigation financing, globally known as third-party funding, emerges in Venezuela as a strategic financial solution amid an economy characterized by volatility and a shortage of liquidity. In an environment where companies must prioritize their operating cash flow to stay afloat, allocating resources to lengthy legal processes represents a very high opportunity cost. Loopa introduces a vital alternative in the Venezuelan market: the possibility for companies and individuals to transfer the financial risk of their legal disputes, allowing them to access justice and defend their assets without becoming financially depleted in the process.
History and evolution of litigation financing in the country
While litigation financing is a well-established industry in Europe and the United States, in Venezuela its adoption is a recent phenomenon, driven by the need for mechanisms of asset protection in the face of the economic crisis. Historically, litigation was financed with own resources, but the economic contraction of the last decade forced the legal and business sector to seek external alternatives. Loopa positions itself as a key player in this transition, bringing a professionalized structure that allows Venezuelan litigants to sustain legitimate commercial claims, both locally and internationally, that might otherwise have been abandoned due to lack of budget.
Legal framework: validity under the Venezuelan Civil Code
Venezuela, like its neighbors in the region, is governed by a continental civil law system. Although there is no specific law regulating third-party funding, the practice is completely legal and is supported by freedom of contract and classic figures of the Venezuelan Civil Code. Specifically, the figure of "assignment of litigious rights" (articles 1549 and following of the Civil Code) and the assignment of credits allow a third party to acquire an interest in the outcome of a lawsuit. Loopa's contracts are structured under this normative framework, respecting the autonomy of the parties' will and ensuring that the financing is a private, valid, and enforceable agreement under the law.
The importance of arbitration in the Venezuelan environment
Given the uncertainty that often surrounds ordinary justice, commercial arbitration has become the preferred mechanism for resolving business disputes in Venezuela. Centers such as the Business Center for Conciliation and Arbitration (CEDCA) and the Arbitration Center of the Caracas Chamber (CACC) maintain high standards of professionalism. However, the costs of these procedures are usually high and often indexed in foreign currency. Litigation financing plays a fundamental role here: it allows companies to cover the fees of arbitrators and specialized lawyers, ensuring high technical quality litigation in neutral venues, without affecting the company's financial operations.
Judicial disputes and protection against inflation
Judicial litigation in Venezuela presents unique challenges, mainly related to the duration of the processes and the impact of inflation on the amounts claimed. Although recent jurisprudence has moved towards indexing judgments, waiting for years for a final decision remains a significant financial risk. Loopa offers a monetization tool that allows plaintiffs to advance value and obtain present liquidity on a future litigious asset. This transforms an uncertain and long-term accounts receivable into immediate working capital, mitigating the risk of devaluation and the uncertainty associated with the procedural times of the judicial system.
Conclusion
The entry of litigation financing into the Venezuelan market marks a milestone in the modernization of the country's legal services. Through Loopa, a concrete response is offered to the needs of a business sector that requires resilience and financial creativity. By operating within the framework of rights assignment and enhancing the use of commercial arbitration, this tool not only facilitates access to justice but also balances the scales for those actors who, having legal reason, lacked the economic strength to enforce it. The future of litigation in Venezuela points towards this strategic collaboration between capital and law.
Our venezuelan team
