Funded Litigation
Having the costs of litigation funded by a third-party can have significant benefits for both sides. But it is essential to choose the right funders, ensure that your application to them has the best chance of success, and agree the right terms for the deal.

Pursuing a commercial dispute usually has two main downsides: cost and risk, both of which can be a barrier to justice. In the right circumstances, funded litigation is a way to overcome that barrier.

In essence, funded litigation involves a claimant offloading some or all of the costs and the risk of pursuing that claim; in return, the claimant shares some of the proceeds of the claim, if it is successful. And this is an important point: in almost all cases, the funding is ‘non-recourse’ – the claimant only needs to repay the funding if they are successful. If the claim fails, the claimant pays nothing.

Funding for disputes can come from a variety of sources. Three are key in commercial disputes.

Legal funding

Lawyers are usually the most costly element of pursuing a claim. Some offer ‘No win, no fee’ retainers, such as Conditional Fee Agreements or Damages Based Agreements.

Legal expenses insurance

Insurance policies can be obtained either before (BTE) or after (ATE) a dispute arises. They can cover a disputant’s legal or expert costs of pursuing a claim (own-side cover) or the costs it may be ordered to pay its opponent if its claim is unsuccessful (adverse cover).

Third-party funding

Specialist lenders make investments in return for repayment of the capital plus an additional sum – but only if the claim is successful, as these deals are invariably non-recourse.

Funded litigation is not available for all claims. Funders typically require all three of the following:

A defendant or defendants with sufficient identified assets to pay the claim or settlement
A claim that is economic to pursue, so that the costs will not be disproportionate to the claim or settlement proceeds
A claim that has reasonable prospects of success (specifically, where a suitable lawyer rates the chances of success as at least 60%)

Funded litigation does not only open up litigation to those who couldn’t otherwise afford it. It can also benefit businesses that have the necessary capital but would prefer to deploy it elsewhere. And it can also enable an in-house legal team to pursue litigation that it would not otherwise have started, changing the department from a cost to a profit-generator.

Experience and innovation

We can guide you through every step of the funded litigation process, using not only our experience of previous cases but also our willingness to innovate and find creative solutions. There are four key considerations.

The first is to establish whether your case is suitable for funded litigation, and create the appropriate funding structure to maximise the recovery.

The second is to find a suitable funder or insurer. Many funders specialise in certain types of case, or prefer those above a particular size, so a case that is unattractive to one may be appealing to another. Having been active in the sector for decades, we have strong relationships with many funders and insurers, and can help you to find the one that is most suited to your particular circumstances. If required, we can also help you to identify opportunities to initiate funded litigation.

The third is the funders’ due diligence process. Naturally, the funders will want to be confident that they have correctly assessed their risk and the potential upside, so they’ll want to know the details of the claim, the defendant’s assets, and much else. We can prepare the funding application for you, and ensure that it includes all the necessary information to give you the best chance of being accepted.

The fourth is to negotiate the terms of the agreement with the funders or insurers. This will of course include financial considerations, such as what costs the funders will pay for and how any settlement will be divided among the various parties involved. It should also clearly define the circumstances in which the funders will receive a return on their investment; their responsibility in relation to settlement decisions; how you will communicate with them and report progress; what happens if you lose and are ordered to pay the other side’s costs; what happens if the case’s prospects of success change significantly; grounds for termination, and what happens after that; confidentiality; and many other important issues.

With funded litigation, both the benefits and the potential pitfalls are significant. We’ll help you to maximise your chances of success.