Funding Claims in Litigation or Arbitration
This note is a general guide to the various methods of funding commercial claims that are now available. It is not legal advice. If any of the options are of interest to you, please discuss them with the lawyer managing your case.
Damages Based Agreements
Under these arrangements if you obtain damages or some other financial benefit then and (only then) do you pay a percentage of the sums or benefit you recover. So for example, if you recover £100,000 and the agreed percentage is 25% then your fee will be £25,000.
Conditional Fee Agreements
In these agreements the amount you pay is different if you win or lose. There are a number of variations that are used to match particular cases. There are no win no fee, no win low fee, or no win expenses only agreements. More often than not there will be one fee payable if you lose and another, much higher fee due if you succeed in the claim. You will have to fund the gap between the lower and the higher fee as that gap cannot be recovered from your opponent..
Legal Expenses Insurance
There are two types, before the event and after the event.
Legal expenses insurance that comes with your household insurance is one example of before the event insurance. It will usually fund your lawyers and provide some protection against the costs of losing the claim.
After the event insurance is also available. If you have a claim you want to bring or one you need to defend then you may be able to obtain insurance to cover your legal costs or the costs that you have to pay the other side if you lose, or both. The premiums for this type of insurance are often substantial.
After the event insurance can be and often is linked with other types of funding, particularly conditional fee and third-party funding arrangements.
Third-Party Funding
Under this type of agreement your lawyers’ costs and your out-of-pocket expenses are paid by an independent third party who, in return, will usually take a share in what you win and recover interest on the money they advance. Until recently these arrangements had been confined to large claims but a market is now developing in disputes involving relatively small amounts. They are usually only appropriate for businesses and individuals who have a claim to bring rather than those who want to defend a claim.
You should consider carefully all of these arrangements and the fixed fee or hourly rate charging schemes that we can offer to decide which is most appropriate for you.
You should always carry out a careful risk assessment and cost benefit analysis before embarking on any litigation. One of the advantages of using alternative methods of funding is that a third party will have checked our assessment of your case and the chances it has of succeeding before deciding to share the risk with you.
In all of these schemes you will give up some of the control you have over your claim. If we or any third party is taking over part of your risk then it is reasonable to expect them to have some control over that risk, particularly the amount of any final settlement.
More Information
If you require further information about any of the funding options above, please contact us on 01530 266 000 or by email to ashipley@mslaw.co.uk.
A copy of this note can be downloaded from this link - M&S Solicitors Limited - Funding Options