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Enable — a practical guide to litigation funding

Damian Carter provides a practical guide to litigation funding.

Damian Carter provides a practical guide to litigation funding for commercial litigation claims.

What is litigation funding?

Traditionally, clients have paid their solicitors on a privately paying basis. A fixed fee is agreed or hourly rates are agreed and the client is billed for the work done by the solicitor in accordance with the agreement and the terms of business.

Litigation funding is a way to finance litigation, often through a third party funder. Third party litigation funding is a form of non-recourse financing for litigation. 

Enable is a bespoke funding arrangement between Weightmans LLP, a funder, and an insurer, arranged via Howden, a broker, for commercial claims requiring litigation funding and adverse costs cover.

Providing a claim qualifies and meets the pre-set criteria, all of the paperwork has been pre-negotiated and pre-agreed, meaning that funding can be obtained more efficiently, quickly and cost effectively. funding

How does litigation funding work?

In exchange for an agreed share of the proceeds of a successful claim, a third party litigation funder will normally fund some or all of the legal costs and disbursements to take the claim to trial. If the claim is unsuccessful the funder will lose its investment.

What types of cases does litigation funding cover?

Commercial contract disputes, shareholder disputes, professional negligence, property litigation, contentious trusts and probate, construction and engineering disputes, insolvency litigation, intellectual property, banking, debt recovery, subrogation and recoveries, partnership disputes, warranty claims and more.

What are the benefits of third party litigation?

This can be very valuable to a business, to leverage meritorious claims as a potential asset and finance them off balance sheet with the use of third party litigation funding. It can also be a useful way to try to manage costs and maximise recoveries. This can also be an effective way for businesses to pursue a claim against well-resourced opponents. Litigation funding also:

  • Allows cases to be unlocked which require funding
  • ATE insurance and funding are non-recourse based
  • Pre-agreed ATE insurance policy wording and litigation funding agreement removes the need to negotiate long legal documents
  • Fixed pricing
  • Increases certainty of securing ATE insurance and funding
  • Security for costs addressed via an Anti-Avoidance Endorsement offered at a discounted rate, if required (as an add-on)

What happens if I/we win the case?

In the event of a successful outcome, the funder is paid a return on their investment, which is paid out of the damages or settlement sum received from the opponent. The premium on the ATE policy is also payable from the damages received, as well as any success fee payable to the solicitors and counsel.

What is After the Event Insurance ("ATE")?

ATE is an After The Event insurance policy which will cover a client if they have to pay their opponent’s legal costs and disbursements incurred as a result of bringing the claim. The ATE policy, provided as part of the Enable package, covers adverse costs orders (situations where you would be ordered to pay the opponent’s costs, either on an interim basis or by way of final judgment / order).

What does After the Event Insurance cover? 

The cover is for the opponent’s costs, and the premium is paid only in the event of success at the conclusion of the claim.

Innovative and flexible litigation funding options    

Third party litigation funding is often combined with the law firm acting on some form of risk-reward basis in respect of its legal fees incurred in dealing with the litigation. Third party litigation funders often require the law firm to also have some investment in the case, with part of the legal fees at risk if the claim does not succeed.      

There are a number of different ways of funding the costs of litigation when the claim has good prospects of success. In addition to the traditional privately funded method, cases can be financed by the law firm acting under a conditional fee or “no win-no fee” agreement (“CFA”); “discounted” or “partial” CFAs; or less commonly a type of contingency fee arrangement known as a “damages based agreement” (“DBA”). 

Where you have a strong claim, we can help you explore innovative and flexible funding arrangements. Companies can leverage meritorious claims as a potential asset and finance them off balance sheet with the use of third party litigation funding. Individuals can also benefit from commercial litigation funding by using this combined with ‘ATE’ insurance to alleviate some of the risk and cost of pursuing litigation where they may not otherwise have the necessary resources to fund a claim.

What is the process when using third party litigation funding?

Contact us if you think you have a claim that may be suitable for third party litigation funding. We can discuss with you whether we consider that a funder may be interested in funding the claim. This will require consideration of the merits of the claim, the value of the potential claim, and whether the opponent is likely to have the means to meet any successful claim or is insured. If a claim is suitable for third party litigation funding, we will need to review the key documents and evidence and consider the likely costs to take the matter to trial.

Enable is a bespoke funding facility providing commercial terms for litigation funding and adverse costs cover. Contact Damian Carter on 0161 214 0593 or Jessica Kraja on 0161 214 0556 for further information.       

If you have a claim and would like to know more about our litigation funding service and flexible options for funding litigation claims, please contact our commercial litigation solicitors.