Small businesses that lack the appetite - or cash – for an expensive legal dispute may have an unlikely new saviour in the form of Europe’s largest insurance company. From next month, litigants will be able to call on the might of Allianz which is launching a new business dedicated to investing in British legal disputes.

The insurer is the first mainstream institution to join the UK’s fledgeling market for third-party litigation, where investors offer to pay legal fees upfront, in return for a share of the winnings.

The model, which until now has been dominated by specialist firms, has traditionally met with suspicion in Britain because of concerns over whether third parties that have not been harmed should be allowed to profit from other people’s disputes.

Since Allianz will typically take about 30 per cent of the winnings, there are substantial sums to be made but Christian Stuerwald, who will run the UK fund from the start of next month, said: “Going to court in the UK is prohibitively expensive, especially for small and medium-sized businesses who are often intimidated into backing down when they have a genuine claim against a larger company. We will help address this balance.”

Allianz, which has already made investments in UK court cases from Germany as a markettest,declined to say how much money it would be devoting to English disputes but insisted that since the fund is “a subsidiary of Europe’s largest insurance group we won’t turn down good opportunities through lack of funds.”.

Although Allianz has concentrated on small and medium-sized domestic disputes so far, its arrival in London coincides with a surge of interest in third-party funding for legal cases.

Although litigation funding remains in its infancy, lawyers said that recent developments suggest that it is acceptable under UK law so long as the investors do not try and alter the outcome of the case.

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