Funded disputes, also known as third party funding or litigation funding, is an established feature in commercial and regulatory disputes. It is an important tool to allow legal claims, which might not otherwise be pursued, to be brought to court.  Ultimately, by obtaining litigation funding from a third party, a litigant can avoid some or all of the costs and risks of pursuing litigation or arbitration. As such litigation funding helps to monetise assets that might otherwise remain unexploited.

Shepherd and Wedderburn are at the forefront of litigation funding. For over a decade, we have supported clients to use litigation funding to identify new assets and pursue existing claims. Our innovative approach regularly see us act in ground-breaking funded litigation matters. If you have any queries or require assistance with litigation funding please contact Ben.Pilbrow@shepwedd.com or John.MacKenzie@shepwedd.com.

What is a funded dispute?

A funded dispute usually involves a commercial funder agreeing to pay some or all of a claimant’s legal costs in return for a share of damages or settlement sums or a payment representing a multiplier made available to the claimant. Funding is generally on a no win-no fee basis, so if the claimant is unsuccessful the funder loses its investment.

Typically, the funding will cover the funded party’s legal fees and expenses incurred in the claim. The funder usually obtains insurance or a bank guarantee to pay the other side’s costs if the funded party loses, and to provide security for the opponent’s costs.

Advantages and disadvantages of litigation funding

Advantages

Ultimately, litigation and arbitration can be expensive and therefore, litigation funding gives a claimant access to the financial liquidity required to proceed with legal action.

Additionally, given the nature of litigation funding, it allows a claimant to reduce the risk of pursuing legal action. Given the risk associated with litigation and arbitration, funders are generally only interested in good claims which may assist a claimant to understand the likelihood of success (and possibly encourage early settlement by another party).

Disadvantages

However, given the risk associated with litigation and arbitration, funders generally seek a significant proportion of a successful claimant’s recoveries in return.

Additionally, the process of packaging a case for presentation to a funder can be expensive, and not costs which can be recovered if the claimant is successful.

The Funding Process

Shepherd and Wedderburn has significant funding expertise and has previously assisted clients in identifying claims that are suitable for funding; identifying appropriate funders; drafting, negotiating and structuring the funding deals; and representing claims before the appropriate authorities.

Generally, the first step is identification of a fundable claim, a step with which Shepherd and Wedderburn’s experts can help.

The second step is to identify a litigation funder which has sufficient capital and is interested in taking on the claim. Shepherd and Wedderburn’s past experience and its close relationship with members of the Association of Litigation Funders means that we are in an unrivalled position to address any client’s funding needs.

The third and most important step is ‘packaging’ the claim attractively for a funder to enable it to carry out due diligence in considering whether to accept the risk associated with funding the litigation. This specialised process requires gathering of key documents, legal opinions, information on the respondent’s position and a detailed proceedings budget. In considering the ‘package’ the funder will calculate the likely return which is generally based on the length of proceedings and the level of the risk. The return may be calculated according to a fixed percentage share of recoveries, a percentage of the funding to be provided or a combination of both depending on the case.

Funded Portfolios

As third party funding offers opportunities to manage risk and monetise litigation assets, portfolio funding arrangements enable multiple cases to be funded under a single facility. Such portfolio funding gathers multiple claims that a company may have into a consolidated package. This is an attractive arrangement for both the claimant and the funder, as it is cheaper than seeker funding for individual claims whilst also ensuring risk diversification.

As the first UK100 law firm to offer a multi-million-pound litigation finance portfolio under an arrangement with a leading global finance firm focused on the law, Shepherd and Wedderburn was (and continues to be) at the forefront of portfolio funding arrangements in the UK.

Our Services

Shepherd and Wedderburn’s dispute resolution team are experts in funded disputes and have consistently been at the forefront of this developing market.

Having successfully brought the first funded competition damages claim in the UK Competition Appeals Tribunal, Shepherd and Wedderburn have been working with funders to come up with solutions for clients for years. Our experience has ranged from claims arising from insolvency valued in the hundreds of millions, through to contractual disputes of less than a million.

Experience

Shepherd and Wedderburn was the first UK100 law firm to offer a multi-million-pound litigation finance portfolio under an arrangement with a leading global finance firm focused on the law.
We represented the first party ever to make use of third party funding in a claim before the Competition Appeals Tribunal. Our experience and knowledge of funded disputes, in all their forms, and our close relationship with members of the Association of Litigation Funders, means that we are in an unrivalled position to address your funding needs.