Litigation is a powerful process through which a party can seek to resolve an ongoing dispute, where a pre-action settlement without involving the Court has not materialised.
Whilst litigation is both time consuming and carries with it an element of risk, it is also a costly process, whereby significant legal fees are often incurred to satisfy each procedural step through to trial.
There are however potential ways to navigate those legal fees. Funding and/or fee arrangement options may be available, to manage legal costs and mitigate potential financial exposures, enabling that party to engage in litigation.
The most common options are set out in further detail below.
TPF is where a commercial funder agrees to finance a party’s legal costs (or a proportion of those costs) in exchange for a success fee if the claim is ultimately successful.
As TPF funders typically only benefit in the event a claim is successful, TPF funders will want to ensure that they are funding a claim with merit. Counsel’s Opinion is usually required at the outset of the claim, whereby Counsel will determine the prospects of success of a potential claim, which will then be relayed to the funder to consider.
TPF funders can cover legal fees (i.e solicitor fees) and disbursements (e.g. Counsel fees and/or any other associated costs). The success fee paid to the funder is often an agreed percentage of the claimant’s sought damages, or a multiple of the funder’s investment. The funder does not typically involve itself with the day-to-day progression of the litigation, but will require regular updates, and will be influential should a settlement be explored between the parties.
TPF funders will often only be interested in funding higher value disputes.
ATE insurance protects the claimant against the risk of having to pay the opponent’s legal costs if the claim is unsuccessful, where typically in such circumstance the ‘loser’ is ordered to pay the ‘winner’s’ costs.
However, If the claim is successful, a premium will become payable to the insurer (to account for the cover that it provided in the event claim was unsuccessful).
Any premium payable is typically deferred and contingent upon success (i.e. the premium only becomes payable if the claim is successful and is often deducted from the damages recovered by the Claimant).
ATE is often utilised where a significant adverse costs risk exists and is often used alongside TPF to create a package that seeks to manage the financial risks of bringing a claim.
CFAs are most often known as ‘no win, no fee’ arrangements.
A ‘no win, no fee’ arrangement could be agreed between a law firm and its client, but it may also be agreed that the law firm will only invoice a percentage of fees as the matter progresses, with the full amount becoming payable if the claim is ultimately successful.
Often, to account for the financial risk that has been taken by the law firm, if the claim is successful, a success fee will also be charged in addition to the law firm’s standard fees.
CFAs enable a party to pursue litigation with lower up-front costs, but with a premium becoming payable if the claim is successful.
DBAs are typically where a law firm is paid a percentage of the client’s damages recovered (of up to 50%) if the claim is successful.
If the claim is unsuccessful, the client typically does not have to pay its solicitor fees, however the client will still be responsible for the opponent’s costs and its own disbursements, unless those are also covered by existing insurance policies.
iLaw’s Dispute Resolution team often works with clients who utilise funding and fee arrangements to assist with having the financial capability to issue a legal claim, should it become necessary, once all other options have been explored.
If you have any questions concerning an ongoing dispute, or if you are concerned that an ongoing issue is close to being escalated and you would like to discuss your options, please do get in contact with Jamie Short at jamie.short@ilaw.co.uk or call +44 (0)203 987 0222.
