When seeking legal services, understanding how solicitors charge for their work is essential. Solicitors use various billing methods depending on the type of legal matter and the complexity of the case. Running a legal case can be expensive, and a range of costs will be incurred, such as solicitor and barrister fees, court fees and expert fees.

One way to manage the costs of your litigation claim is by choosing the most suitable billing model for solicitor fees. Solicitors offer various pricing structures, including hourly rates, fixed fees, or a combination of both. In some cases, they may also provide a no win, no fee arrangement, meaning the client only pays if the case is successful.

Given that commercial litigation can incur significant costs, it is essential to be informed about funding and insurance options to ensure a cost-effective approach to dispute resolution. At Annecto Legal, we can assist clients in finding funding and insurance coverage to provide peace of mind.

Choosing the right billing model

Choosing the right litigation payment option for you or your business depends on the specifics of your case, your financial situation, and your risk tolerance. As a start, consider the following questions:

• How long will my case take to resolve? – Hourly billing can become expensive if the case is prolonged, while fixed fees provide cost certainty but may result in higher expenses than initially expected.

• How confident am I in winning? – Since the losing party is typically responsible for both sides’ legal fees, a higher level of uncertainty increases the risk of incurring significant costs if the case is unsuccessful.

• How much compensation am I likely to receive? – If the expected damages are substantial and you’ve chosen a contingency fee arrangement, you may find it frustrating to give up a large portion of your compensation.

• Will my opponent settle quickly, on reasonable terms? – Your opponent may decide to settle, but they could also run up costs to make it hard for you to succesfuly pursue your claim. They may bring a Security for Costs application or use other tactics to frustrate you.

Carefully assessing these factors will help you select the most suitable funding model to manage costs and risks effectively.

Types of billing options for solicitors’ fees

Law firms use different fee structures depending on the nature of the legal service and the client’s needs. Some of the main types of billing options for solicitors’ fees include:

Hourly rate – Solicitors charge an hourly fee, which varies based on experience and the current solicitor guideline hourly rates. This is a common model that is used across most disputes. Clients receive a detailed breakdown showing time spent on tasks.

Pros: Under the standard hourly rate model, if you win your case, you keep 100% of the damages, and in theory, you should not incur any legal fees. However, in practice, only around 70% of legal costs are typically recoverable. If the case settles quickly, legal fees tend to be relatively low.

Cons: The solicitor is paid to complete the work regardless of the case’s outcome, meaning they assume no financial risk. There is also no direct incentive for them to resolve the case swiftly. As the client, you take on the financial risk for your own legal fees and potentially your opponent’s, with no certainty about how much those costs may ultimately be.

Fixed fee legal services – Fixed fees involve pre-agreed costs for specific elements of a case, irrespective of the actual amount of work required. While it is sometimes possible to arrange a fixed fee for an entire dispute, this is rare. In such situations, a Discounted Conditional Fee Agreement may be a better option to maximise the recovery of legal fees from the losing party.

Pros: The key advantage of a fixed fee arrangement is that no matter how long the case lasts, you only pay the agreed amount for legal services. If successful, you retain all awarded damages.

Cons: If the case concludes quickly, you must still pay the full agreed fee. This is why fixed fees are more commonly applied to different phases of a case rather than covering the entire dispute, as predicting total costs in advance can be challenging.

Funding a claim

The commercial litigation process can lead to high levels of legal costs. Fortunately, there are funding and insurance options available to assist when conducting litigation in a cost-effective manner. These methods include:

No win, no fee agreements

No win, no fee is a type of billing model used by solicitors in the UK, where the client will not have to pay the solicitor if the case is lost. This type of billing model is also known as a “conditional fee agreement” or CFA. Damages based agreements are also a type of no win, no fee agreement. Under a CFA the solicitor will typically charge the client a success fee if the case is won. This success fee is calculated by reference to hours worked, agreed upon in advance and is capped by the law. With a DBA the client pays over a percentage share of the damages recovered to the legal team, so the fees are referenced to the amount recovered rather than the amount of time spent on the claim.

No win, no fee agreements will often require parties to take out an “after the event” (ATE) insurance policy, which will cover the client against any costs incurred by the other side in case the case is lost. 

Third party funding

One funding method that is commonly used for the commercial litigation process is third party funding. Third party funding acts as a form of non-recourse financing for litigation. Third party litigation providers take on the financial risk of litigation so that clients can pursue a claim without having to worry about the legal fees associated with it.

In return for taking the risk, the litigation funder will typically seek a share of the proceeds in the region of a fifth to a third of any damages recovered. This means that you keep up to 80% of the reward, having taken none of the risk. If the claim is unsuccessful, the funder will lose their investment. 

ATE insurance

After the event (ATE) legal expenses insurance is taken out after the event that has led to a dispute has taken place. ATE insurance can protect you from paying your opponent’s legal costs, should your claim not be successful.

However, ATE insurance is not free, and it is important to remember that if your case is successful, you may have to use some of your reward to pay the cost of the insurance premium, which will be included in the terms and conditions.

How can Annecto Legal assist?

In commercial litigation, getting the right legal advice early without spending an excessive amount on legal fees is the best way to save money and protect your position.

Annecto Legal helps clients realise the value of their commercial disputes. We work closely with litigation funders, insurers and lawyers who seek alternatives to the traditional billing options for solicitors’ fees.

If you have been involved in a dispute, get in touch with an expert member of our team to find out which litigation cover is the right litigation funding option for you to reduce your commercial litigation costs.