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Guide to Commercial Litigation and Funding Your Case

Guide to Commercial Litigation and Funding Your Case

guide to commercial litigation

While no one welcomes disputes, they are often an inevitable aspect of any business. Fortunately, the majority can be resolved through discussion or negotiation, without resorting to legal intervention or lawyers. Even in cases where legal professionals become involved, alternative resolution methods frequently sidestep the necessity for court proceedings. However, there are instances where no other recourse is available.

Even if you entrust the litigation process to your advisors, there are practical rules that will impact both you and your business. Grasping these implications from the start can not only offer a solid foundation for success in your case but also present a genuine opportunity to mitigate the adverse effects on your business operations, management time, and the challenges faced by those in leadership positions.

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.

Making a commercial claim

In commercial law, the formal guidelines known as “Pre-Action Protocols” dictate the necessary steps for prospective litigants before initiating legal proceedings. These protocols outline specific procedures and timelines set by the court to address various types of disputes.

The primary purpose of these protocols is to ensure that parties identify the contested issues, exchange relevant information, and make efforts to resolve the claim. Failure to adhere to the applicable protocol, without valid justification, typically results in court-imposed sanctions.

Typically, once evidence has been gathered to support a claim, the proposed claimant is advised to dispatch a letter outlining the claim to the opposing party. This is commonly known as a letter of claim or a letter before action. It should contain enough details about the claim to allow the defendant to comprehend the issues without needing additional information requests.

Parties are additionally required to engage in discussions, negotiations, and alternative dispute resolution methods before initiating legal proceedings, as well as during ongoing proceedings if already initiated.

If the dispute cannot be resolved during the Pre-Action Protocol stage or through alternative dispute resolution, it may then progress to court proceedings. Legal action is started by lodging a Claim Form with the court. It is essential during this time to receive professional legal advice from a solicitor in order to ensure that the correct steps are being taken to obtain the best outcome for the business dispute.

The risks of commercial litigation

When deciding whether to pursue a commercial litigation claim, the financial implications of being liable for the legal costs of both sides if the case isn’t successful, are often the biggest factors to consider. The legal costs for the legal services involved in commercial litigation should always be taken into account as this can also have a significant impact on a business.

However, just as in any aspect of business, there are numerous ways to finance projects and manage risks through insurance and other such tools. Businesses using appropriate risk management tools can shift all the costs and risks away from their balance sheet in the event their case proves unsuccessful. The only financial element that remains is the ‘contingent asset’ – the money received if they win to recover costs and damages.

As it only has an upside, the associated management time relating to any commercial litigation claim can be seen as a good return on investment.

Funding a claim

If a business dispute does arise, it 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:

Third party funding 

One funding method that is commonly used for business disputes 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. 

Damages based agreement 

damages based agreement (DBA), also known as a contingency fee agreement, is a type of arrangement made between a client and a solicitor in which the solicitor agrees to fund their case and share the risk of litigation. In return, the solicitor will be paid a percentage sum of the damages recovered as long as the client’s case is successful.

DBAs provide that, instead of being paid on a conventional hourly rate, the solicitor’s legal fees are only payable in the event that the case is successful. Therefore, these types of agreements allow clients the opportunity to pursue a case without having to worry about the solicitors’ fees associated with it. In some circumstances, however, fees for Counsel and other disbursements may still be payable by the client. 

ATE insurance

After the event (ATE) legal expenses insurance is taken out after the event that has led to a dispute has taken place, to protect you in the case of your claim being unsuccessful. 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 award to pay the cost of the insurance premium, which will be included in the terms and conditions.

After the Event insurance is often used in conjunction with a Damages Based Agreement, or third party funding.

How can Annecto Legal can assist with commercial litigation

In business dispute cases, getting the right 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 that seek alternatives to the traditional hourly rate funding model.

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.

Get in touch

* Annecto Legal can only assist on case where the loss is in excess of £100,000, with the exception of data breach claims. If you need assistance on a claim worth over £100,000, please get in touch using our form or the details below:

Registered Office

Annecto Legal Ltd, 106 Kennedy Building, Murray Street, Manchester , M4 6HS


0800 612 6587


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