Litigation funding is not only the preserve of class actions. From Augusta’s experience in the UK, we’ve determined that most standard funded claims (litigation and arbitration) involve commercial disputes. The majority of those include business-to-business claims for breach of contract, professional negligence, and shareholder disputes.
With litigation funding, the funder pays for legal costs, counsel fees, and disbursements. A major attraction of litigation funding is that it is non-recourse, whereby if the case loses, the funded party pays nothing. The funder generally meets the law firm’s costs and claim-associated expenses, and the claim holder can also cover the adverse cost risk (the loser pays the other side’s costs) through after-the-event insurance (ATE). In return, the funder charges a commission based on either a multiple of funds invested in the case or percentage of damages awarded upon a successful resolution. Depending on the ratio of costs to damages, the claimant would generally expect to receive around 70-80 percent of the damages, though this is reliant upon the proportionality between the claim size and cost to run.
With funding, businesses can pursue meritorious claims while benefiting from:
Financing also means that law firms can attract more opportunities that benefit their relationship with their clients by introducing the option of non-recourse litigation funding. The funder is aligned with the business as they want a positive outcome and would prefer to spend more on good advice, where required, to achieve a successful resolution. The law firm avoids potential client conflict over billing, as the funder deals with invoices based on pre-agreed budgets.
The result is that the quantity of work for law firms should grow to offset falling advisory revenue and the quality of work is attractive as law firms are not forced into aggressive fee caps or fee deferrals. The use of funding shifts the risk from the business and law firm to the funder.
Without funding, the alternative is a lose-lose. Businesses fail to exploit and monetise good meritorious claims and law firms are left with litigation resources being potentially underutilised. Let litigation funding help you access valuable and scarce cash in these challenging times.
For all questions regarding the topics raised in this blog, please contact Louis, Gian a member of our team of litigation funding experts.