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Litigation Finance and Litigation Funding

Litigation Finance and Litigation Financing

litigation finance, litigation financing

Legal disputes can pose a significant financial risk for businesses as the costs of litigation can be great. Unfortunately for some, disputes are often an unavoidable aspect of business. This is where litigation finance emerges as an increasingly prominent legal tool, offering substantial value to both businesses and their in-house legal teams.

Legal finance serves as a strategic resource, providing financial support to companies engaged in legal proceedings, enabling them to navigate intricate litigation or arbitration without jeopardising their financial stability. At Annecto Legal, we can assist businesses in securing litigation finance for any potential legal disputes that may arise.

What is litigation financing?

Litigation finance, also referred to as legal funding or non-recourse third-party litigation funding, is a practice where a third party provides capital to businesses engaged in legal disputes. In return, the third party receives a share of the potential financial recovery from the case.

This form of financing is commonly utilised to support the expenses associated with legal proceedings. It can also extend to covering costs across portfolios of cases or deferring the expenses tied to defending claims. External financing is often used by businesses to manage expenditures efficiently and make budgets go further. A wide array of options is available to corporate entities.

Litigation finance can improve access to justice by enabling businesses with potential legal claims to pursue their cases without being hindered by limited financial resources. This type of funding is used in various legal contexts, including commercial disputes, intellectual property litigation, class-action lawsuits, and more.

The capital involved in litigation finance is typically non-recourse, meaning that it is not considered as debt. This finance arrangement implies that the investment and returns are contingent upon the successful resolution of the legal matter, effectively shifting costs and risks off the balance sheet for the duration of the legal battle.

Litigation funding options

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. If they believe the case has potential prospects of success, 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 funding 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 funding 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 assist with litigation financing?

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. The litigation funding industry is frequently being used more in business litigation matters.

Annecto Legal helps clients realise the value of their commercial disputes. We work closely with litigation funders, insurers and law firms that seek alternatives to the traditional hourly rate funding model.

If you have been involved in a dispute or are pursuing a legal claim, 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

Phone

0800 612 6587

Email

info@annectolegal.co.uk

Contact us directly 

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