In the realm of legal proceedings, litigation risks constitute a pivotal aspect that both individuals and businesses must navigate with caution. Litigation brings forth a diverse range of challenges and uncertainties that can significantly impact the parties involved. As such, a comprehensive understanding of these risks is essential for informed decision-making and strategic planning within the legal landscape.

Solicitors must ensure their clients are adequately informed on litigation risks. Obtaining informed consent in relation to legal costs is a crucial aspect of legal practice. It involves ensuring that clients fully understand the potential costs associated with their legal case and giving their explicit consent before proceeding. This practice is rooted in ethical considerations and legal requirements and is important for maintaining transparency, trust, and fairness in the solicitor-client relationship.

What is litigation risk?

Litigation risks refer to the various potential negative outcomes, uncertainties, and adverse consequences that individuals and businesses face when they become involved in legal disputes and litigation proceedings. These risks extend beyond the core legal arguments of a case and encompass a range of factors that can impact the parties involved.

The outcome of a legal case is never guaranteed. Courts can be unpredictable, and even the strongest legal arguments may not yield a favourable judgment. Unforeseen legal interpretations or procedural issues can influence the outcome.

Litigation can also be expensive as it involves legal fees, court filing fees, expert witness fees, and other associated expenses. These costs can accumulate rapidly, particularly in complex cases that require extensive documentation and courtroom time.

It is essential for individuals and businesses to consider litigation risks prior to litigation to ensure that they are aware of any potential outcomes they may face as a result.

Solicitors are regulated by bodies such as the Solicitors Regulation Authority (SRA). The SRA emphasises the importance of obtaining informed consent regarding legal costs as part of solicitors’ professional obligations and ethical standards.

Funding to mitigate litigation costs risks

If you are a solicitor, it is important to be aware of the various funding options available to your clients to help mitigate financial litigation risks. Consideration should always be given to the suitability and availability of alternative funding approaches. 

Third party funding – One alternative funding method that is commonly used to mitigate litigation risks 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.

The litigation funder will assess the claimants’ prospects of success. If they take on 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 the claimant keeps 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 to protect a claimant from the risk of losing and having to pay the defendant’s legal fees.  ATE insurance can also protect litigants from expert and barrister fees, as well as their opponent’s legal costs, should their claim not be successful.

It is important to note that ATE insurance is not free, and if a case is successful, the claimant may have to use some of their damages to pay the cost of the insurance premium. In some circumstances, an upfront payment will be required for ATE insurance. If the case loses, then the insurance company pays the defendant’s costs and the claimant pays nothing.

How can Annecto Legal assist?

Annecto Legal help clients to mitigate against litigation risks and realise the value of their litigation claims. We recommend that you get in touch with our team as soon as possible so that we can begin to give you the guidance that you require.

We provide our services to a range of clients, including solicitors, accountants, insolvency practitioners, businesses and individuals. We deal with a variety of legal cases including assistance with breach of contract solicitors, professional negligence solicitors, fraud, banking litigation and can even help if you’re suing a solicitor or looking for commercial dispute resolution. 

Contact an expert member of our team today to find out more about alternative litigation funding and which cover is the best choice for you.