Litigation Funding 101

The term litigation funding refers to financing a legal claim, usually via a professional, third party litigation funder but also through innovative legal pricing structures.

A litigation funder is someone with no prior connection to the litigation who supports your claim financially in exchange for a share of any damages recovered.

It is important to find a professional with immediate access and to and control over existing funds, however, rather than relying on an intermediary to raise cash on an ad hoc basis from other third parties. Your solicitor will normally arrange a funder for you.

Even without such third party litigation funding, however, an experienced litigation solicitor can identify and coordinate a range of alternative funding sources to which you might not otherwise have access. These innovative pricing structures include:

  • Alternative Fee Arrangements (AFA): you pay your solicitor by means other than the normal hourly rate e.g. fixed fees, capped fees, blended rates.
  • Conditional Fee Agreements (CFA): commonly known as ‘no win, no fee’, you only pay your solicitor if your case is won; you pay them nothing if you lose
  • Damages Based Agreements (DBA): your legal fees are deducted from the damages you receive, so your solicitor shares the risk and only gets paid if you win
  • After the Event Insurance (ATE): a type of Legal Expenses Insurance (LEI), you are protected from legal costs if you lose and you pay nothing up front – you only pay the insurance premium if you win your claim

These sorts of pricing structures have been in increasingly popular demand over recent years. According to the 2015 Annual Litigation Trends Survey, for instance, 41% of high-revenue UK companies expected a rise in Alternative Fee Arrangements (AFA).

In the same research, moreover, 22% of high-revenue UK companies in 2015 stated their preference for Conditional Fee Agreements (CFA), a dramatic rise from 9% in 2012.

Furthermore, the 2016 Annual Litigation Trends Survey reported that 81% of high-revenue companies saw fixed fees as effective or very effective, whilst 75% and 68% thought the same of capped fees and conditional fees respectively.

As specialist litigation solicitors, we can connect you with various alternative funding sources if you instruct us to take your claim forwards. For a FREE consultation, just call 020 7963 8690 or email law@cgnaylor.co.uk.

Written by James Naylor

Partner, CG Naylor LLP.