Frequently Asked Questions
What is litigation funding?
In short, it is when a specialist Funder agrees to finance the claimant's legal fees involved in a dispute in return for a share of the compensation that may be awarded to the claimant at trial if successful.
If the case wins at trial, the Funder will recover their investment together with a success fee. If the case is not successful, the Funder's investment will be lost.
What features do litigation funders look for when evaluating a claim?
The main consideration for a Funder is whether the claim in question has a good prospect of success at trial. Typically, a Funder will require the claim to have at least a 60% prospect of success in order to agree to provide funding to the claimant. Although each Funder will have slightly different concerns when it comes to evaluating a claim, some of the other important factors are:
How does the funder get paid if the claim is successful?
If the claim is "successful" (and that term will be specifically defined in the litigation funding agreement), the Funder will be entitled to a fee which is payable out of the monetary proceeds recovered from the litigation. Under most agreements, the Funder's fee is conditional upon the claimant recovering sufficient compensation from the opponent and the fee would not therefore be payable until and unless an award of monetary damages has been paid by the opponent to the claimant. The Funder's fee will be specifically set out in the litigation funding agreement. The Funder's fee will, typically, have one of the following features:
What happens if the claim is unsuccessful?
If the claim is unsuccessful (depending on how that term is defined in the funding agreement), the Funder will lose the capital that it has invested in the case. The funded party will usually have no obligation to repay any of the money that the Funder has paid towards the claimant's legal fees in the context of the claim.
The Funder will not receive a fee from the funded party. Under the litigation funding agreement, the Funder's fee is dependent upon the funded party recovering sufficient damages to pay such fee. The Funder may also be ordered to pay the other side's legal costs.
What is the "Arkin" cap and why is it relevant?
The "Arkin" cap is a principle which limits a funder's exposure to adverse costs to the level of the funder's original investment and so prevents a funder having to pay more than their original investment in adverse costs.
The cap protects funders from an open-ended exposure to what could be vast sums in adverse costs. It prevents uncapped liability for the funder on orders made against a funder's client.
A recent case earlier in 2019, however, cast doubt on the judicial application of the "Arkin" cap, when the judge failed to apply it, leaving the funder with exposure of more than five times their original investment. The case has stressed the importance of ensuring that ATE insurance is in place to cover significant adverse costs made against a funder's client.
What is the value of the legal services market and the litigation funding market?
A recent report valued the UK legal services industry at £35bn in 2018 with an expected 5% growth rate year on year. The UK litigation and disputes funding market is estimated to be worth around £1bn in 2018, having doubled in size over the last 3 years.
After the event insurance can work alongside or separate to litigation funding and typically pays out for the other side's professional legal fees if the case is unsuccessful.
If you are looking for a lawyer to advise on your litigation, our recommended panel of solicitors and law firms are experts in this area and can offer flexible funding options.
If you are looking to obtain a quote for business insurance, we work with the leading providers across the business insurance market.
Who are we and how does it work?
Funding Action is an independent funding litigation service that sources and connects specialist third party Funders looking to finance high-value commercial litigation claims with companies seeking finance for their dispute.
Typically, litigation Funders are looking for commercial disputes that exceed a minimum value of GBP 25,000. If your company or business has a commercial dispute which exceeds GBP 25,000 and is looking to source financial support to fund the cost of their legal fees, we may be able to help.
Please contact us below for a free initial assessment of your commercial claim. At this stage, please only provide a short summary of your claim without any confidential details (this will come later).