How Can I Find a Litigation Funder in England?

As a business entering into a legal dispute, you may choose to resort to litigation if alternative dispute resolution methods, such as mediation, have not worked. Litigation can be lucrative if you are successful, as you may receive significant damages and the losing party may be made to pay your legal costs. Funding litigation, however, can be a significant burden and could go so far as to interrupt your business operations. As a result, you may wish to use a litigation funder to help cover your early costs.

This article will elaborate on what a litigation funder is, and explain the process of securing a litigation funder. 

What is a Litigation Funder?

Put simply, a litigation funder is a third-party who provides capital to your business. This allows you to cover your costs as part of any legal claims that you bring against another party. In return, the litigation funder will want a portion of the damages or compensation that you receive if you are successful. This process is sometimes also known as litigation finance or third-party funding. 

Why Use a Litigation Funder?

Litigation funding can be useful for a wide range of businesses. For starters, some businesses may not be able to afford to pursue the legal claim at all without outside capital. Litigation funding, however, is also often used by businesses that do have the ability to fund their own litigation. This is for a number of reasons. 

First, it can be useful for the party bringing the case to share the risk of failure with any investors in the claim. Even though the claimant will have to pay the funder a share of the proceeds, it can still be preferable for risk averse businesses to use a funder. 

Second, many companies have a limited ‘legal budget’ to pursue claims in court. Using a funder will allow the claimant to bring more claims without their internal budget constraining them. 

Further, using a litigation funder can allow the claimant business to take the cost of the litigation off of their balance sheet. This is often achieved through combining litigation funding with various types of insurance, so as to nullify the chance of loss to the claimant. Taking this approach is commercially convenient, as a healthy balance sheet is useful for a variety of reasons.

How is Litigation Funding Structured?

Funding arrangements can vary with the type of case that you are bringing and your likelihood of success. Some of the funding options for legal services that a litigation funder might cover will include:

• conditional fee arrangements, where you only pay your solicitor on the condition that you are successful in your case;
• damaged based arrangements, where you pay your lawyer a portion of the damages awarded if you have a successful outcome; or 
• fixed fees, where you pay your lawyer a fixed rate (usually an hourly rate).

Your litigation funder may propose a funding arrangement based on the available options, after making an assessment as to the likelihood of a successful outcome in your case (offset against the cost of running the claim). 

What Will a Litigation Funder Consider?

First of all, a litigation funder will make an assessment as to your position in the case. This will include a judgement on:

• your prospect of success and the size of your claim;
• the likelihood of the court enforcing an award, in other words, the creditworthiness of the opposition party;
• the quality and experience of your legal advice and team;
• how quickly the funder will receive a return on their investment; 
• risk alignment, in other words, how much risk you are sharing with the funder; and
• whether there is any politically sensitive or controversial material in your case.

Once they have made this assessment, the litigation funder may cover your solicitor and barrister fees, court fees, and disbursements.

When and How Do I Approach a Litigation Funder?

Typically, a litigation funder will prefer that your case is not purely speculative. This means that it is useful to have had a correspondence with the opponent’s lawyers before the claim so that the funder can have an idea as to the opponent’s possible approach to the litigation. 

You will then want to send in an application to a litigation funder, which will involve a summary of the case, any correspondence with the other party, and a letter of advice from your lawyer on the strengths and weaknesses of your case. The funder will then conduct an initial due diligence process, and provide an indicative offer which, if you accept, will lead to a full due diligence process followed by a formal offer. This entire process usually takes between four and six weeks. 

You can find a litigation funder using various sources, including your own lawyers or online sources. Some funders operate within defined markets and in niche claims, and it is useful to keep this in mind when choosing a litigation funder to make an application to.

Key Takeaways

As a business entering into a dispute in the UK, you may wish to make use of a litigation funder. Litigation funders can help you spread risk in bringing your claim, and are thus useful even if you can afford to pay the upfront cost of bringing a legal action.

Litigation funders will look at a number of factors when deciding whether to finance your case. The process of applying to a fund will include an offer of initial terms by the funder, which, if you accept, will be followed by a full due diligence process and a formal offer. 

If you have any further questions about litigation funding, our experienced disputes lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.

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