Third party litigation funding: Mitigate the risk of litigation
When determining whether to bring or fight a claim, legal costs can be a crucial factor in the decision. A potential litigant has to consider not only their own legal costs, but also the potential exposure to the other side’s costs.
Third party litigation funding allows businesses and individuals with a meritorious case for commercial litigation or arbitration the opportunity to pursue it without having to worry about the legal fees associated with it.
As third party funding (TPF) has become more common, the range and number of institutions that are prepared to finance litigation and arbitration have also increased. Alongside third party funders, investment banks, insurance companies, law firms and hedge funds have entered the litigation funding market.
Funding agreements differ from contingency fee agreements and can be particularly complex; therefore, it is essential to have an advisor on your side. At Annecto Legal, we are happy to assist clients in understanding the finer points, as well as helping to secure the best deal.
What is third party litigation funding?
Litigation funding is a way to finance litigation which is often done through a third party funder. Third party funding acts as a form of non-recourse financing for litigation. Third party litigation providers take on the financial risk of litigation, freeing up cash flow and shifting all the risk off your balance sheet.
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.
Many types of legal claims can be covered by third party funding agreements, including breach of contract claims, fraud related claims, professional liability claims, intellectual property claims, shareholder disputes, tax disputes and international arbitration.
When should an application for third party funding be made?
An application for TPF is typically made after the initial case analysis has been carried out and pre action correspondence has taken place. One thing that should be noted is that funding will not always cover costs that have already been incurred. Although, it is possible to seek and obtain funding to cover the early stages of a case if the costs would otherwise be prohibitive (the funder will usually seek a higher level of return in these circumstances).
What are the benefits of third party funding?
Whilst third party funding agreements are typically aimed at claimants, they can also be relevant to respondents facing a counter claim or defending a claim. TPF gives parties the access to justice they require and allows them to bring a claim where they otherwise may not have been able to do so.
Third party funding can be incredibly valuable to businesses as it can help to leverage certain meritorious claims as a potential asset and finance them off balance sheet, and de-risk any potential adverse costs. Third party funding can also be a particularly effective way to try and manage funding costs and maximise recoveries. Additionally, third party funding can also be an effective way for businesses to pursue a claim against better resourced opposition.
Moreover, this type of litigation funding may be beneficial for individuals by using it combined with after the event insurance in order to mitigate against some of the costs and risks of pursuing litigation or bringing a claim where they may not have otherwise had the necessary resources to fund a claim.
Funders are only interested in claims that have good prospects of success. Therefore, they will conduct due diligence and carry out their own analysis before agreeing to provide funding. This analysis may encourage an early settlement once the other party is made aware that the claim has the backing of a funder.
How can Annecto Legal assist with third party litigation funding?
Annecto Legal help clients realise the value of their commercial litigation claims. Annecto Legal was established to help businesses pursue claims and remove any perceived cost barrier to litigation.
The application and process of third party litigation funding can be complex for the unwary. Therefore, we recommend that you contact our team as soon as possible so that we can provide the guidance you require.
We provide our services to a range of clients, including businesses, solicitors, commercial insurance brokers, individuals, insolvency practitioners and liquidators.
Get in touch with an expert member of our team to find out more about third party litigation funding and which commercial litigation finance cover is the right litigation funding choice for you.
Call us today 0800 612 6587, or our business development director, Mark Beaumont, can be contacted by email firstname.lastname@example.org
Annecto Legal is registered in England and Wales.
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* 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:
Annecto Legal Ltd, 106 Kennedy Building, Murray Street, Manchester , M4 6HS
71 Central Street, London, EC1V 8AB
0800 612 6587