What Is Litigation Funding?

Litigation funding is where a third-party, who has no connection to the litigation, agrees to fund all or part of the litigation.

The advantages of litigation funding include:

• The risks associated with litigation are shared.
• For companies with a limited legal budget, multiple claims can be funded at the same time.
• The cost of litigation can be removed from the company balance sheet and the impact on cashflow is minimised.
• Often litigation funders provide operating capital through facilities using the contingent proceeds of litigation as security for the facility.

To find out more about how litigation funding works, please keep reading.

Is there a minimum value of claim a funder will invest in?

It used to be the case that litigation funders would only fund multi-million-pound cases. This no longer applies; most funders are looking for a mixture of larger and smaller claims. Doing so spreads the risk and prevents the funder losing their entire investment in one case.

How do funders decide what cases to support?

There are several factors the litigation funder will consider when deciding whether to risk funding a case. These include:

• The legal merits of the case – funders will normally have the case reviewed by internal and external (usually independent Solicitors) experts to establish whether the legal merits of the case meet the funder’s risk profile. They will want to understand not only the legal arguments, but the evidence that is available to support the claim.
• The economics – litigation funders use AI tools to manipulate budget and damage award projections to establish the risk they will incur in funding a particular case.
• The defendant – litigation funders will closely examine the defendant to see if a) they are likely to be open to an early settlement, and b) do they have the resources available to pay any award made by the judge to the claimant.
• The claimant – Expect your business and finances to be closely scrutinised by the company you approach for funding. The funder will want to understand your intentions in making a claim and ensure you are engaged in the litigation and have an experienced and resolute Solicitor advising and representing for you.

Can a litigation funder demand I use their lawyer and/or settle my case?

Your funder cannot force you to instruct a particular Solicitor or Barrister. Furthermore, a litigation funder cannot exercise excessive control over your case. It is unethical for them to interfere in the solicitor/client relationship, influence strategic decisions, withdraw from the case unreasonably, or meddle in settlement negotiations.

Will I have to take out After the Event (ATE) insurance?

To ensure they are not put in a position where they have to pay litigation costs in the event of your case being unsuccessful, most funders will insist you take out ATE. ATE insurance typically covers disbursements and your opponent’s costs in the event that the court orders you to pay all or some of these.

To talk to us about any points made in this article, please call us on 02476 231000 or email enquiries@askewslegal.co

Please note that this article does not constitute legal advice.