Commercial litigation costs arise as a result of matters relating to commercial disputes in which costs have been ordered, or an offer has been accepted which permits the recovery of legal costs. Commercial disputes typically involve contractual disputes between businesses and clients or suppliers. There are different types of expenses that can arise in commercial litigation, including Counsel and expert fees, Court fees and claims made for solicitor’s profit costs.

Commercial disputes and challenges can often be unsettling and costly. It is essential for any party seeking commercial dispute resolution to have the sufficient resources needed to fund their case, whatever the outcome.

 A party to a dispute may be liable for any costs they incur against the opposing party unless an alternative method of commercial litigation funding or ATE insurance is put in place.

Annecto Legal fills the gaps when clients need access to professional legal advice on any business related issue. It removes financial uncertainties and the need for balance sheet protection against unforeseen major uninsured legal expenses at a low cost.

Who pays commercial litigation costs?

The general rule for litigation costs is that the losing party must pay the winning party’s costs. Whilst it is common for the loser to pay the winner, the Court can apply its discretion in making an alternative costs order in litigation. If there are any express costs awards stated within the damages settlement, then this will usually apply to the case, for example, if the main action was to be settled by way of an offer under Part 36 Civil Procedure Rules.

The Court will apply its discretion when making a Costs Order and will consider a number of factors when assessing how costs are to be awarded. These factors include: 

• Conduct of the case before and during proceedings
• The manner in which the issues in the case have been defended or presented
• The reasonableness of the issues raised
• Whether the successful party has exaggerated their claim for costs

What amount of costs will be awarded?

The parties will typically try to agree on the proportion of costs that the losing party is to pay. However, if both parties are unable to agree, costs will then have to be assessed by the Court.

When assessing costs, the Court will not allow any costs that are unreasonable in amount or unreasonably incurred. There are different bases on which the Court will assess costs: the indemnity basis and the standard basis. On the standard basis, any doubt as to the reasonableness of costs must be resolved in favor of the paying party. On the indemnity basis, any doubt as to reasonableness will be resolved in favor of the successful party.

Commercial litigation costs funding options

It is important that any business or person seeking to resolve a commercial dispute has the sufficient resources needed to do so. As such, there are a variety of commercial litigation funding methods that can be put in place to assist and keep litigation costs at a minimum. These litigation funding options include the following:

• After the event insurance (ATE insurance) – After the event legal expenses insurance is perhaps best thought of as similar to a ‘swap’. For either a small upfront fee or no upfront fee, the insurer will take on all of the risk of the potential adverse cost award. The client has, therefore swapped their obligation to pay the defendants in the event of a loss with the obligation to pay the insurer in the event of a win.This is is usually an attractive swap as the client is much more likely to be in a better financial position following a win than following a loss. Also, the payment to the insurer will only be a percentage of the adverse costs rather than the entire amount.The actual amount that the client will pay for the insurance will normally depend on how long it takes to settle the case. An early settlement could mean that they pay as little as 15% of the amount insured. If the case goes to trial, it is more likely to be in the 40% to 60% range (depending on the insurer and the case). 

• Third party funding agreements (TPF) – Third party funding is an arrangement in which someone with no prior connection to the dispute agrees to finance all or a part of the legal costs in return for a fee payable from the proceeds to be recovered. TPF can also be used alongside other available funding options, such as damages based agreements, conditional fee agreements and ATE insurance.With the assistance of TPF litigation, you are able to avoid taking any financial risks at all: the funder pays for everything in return for a share of the damages. If the case is unsuccessful, the funder bears all the costs – you pay nothing. Third party litigation funding providers take on the risk of your litigation finance, shifting all the risk off your balance sheet and freeing up your cash flow.In return for taking the risk, the funder will typically seek in the region of a fifth to a third of any damages recovered. That means you could keep up to 80% of the reward, having taken none of the risk. 

At Annecto Legal, we can help you determine which alternative funding choice is the correct one for your case in order to reach a successful conclusion whilst keeping commercial litigation costs as low as possible.

How can Annecto Legal assist?

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

Get in touch with an expert member of our team to find out which commercial litigation cover is the right litigation funding choice for you to reduce commercial litigation costs.

Our firm is authorised and regulated by the Financial Conduct Authority as an Appointed Representative of 2direct Limited.

Call us today 0800 612 6587, or our Director, Mark Beaumont, can be contacted by email mark.beaumont@annectolegal.co.uk