Funding for Commercial Litigation

25 July, 2016
by: Cripps Pemberton Greenish

Money - EmploymentLitigation is always expensive and the costs can put some people off going ahead even if they have a good case

There are, however, some commercial options available to assist funding commercial litigation many of which have short, snappy abbreviations: After the Event Insurance (ATE), Conditional Fee Agreements (CFA), Damage-based agreements (DBA) Third party litigation funding (TPLF… ok, that one’s not real!) Easy as ABC? Not quite.

Before the Event (BTE) insurance policies, such as home insurance, sometimes offers legal cover and are worth checking.

DBAs came into play in 2013. Generally, you pay your lawyer if you win and receive money or “damages”. If you lose, you don’t pay your own lawyer’s fees, but you may still have to pay your opponents’ lawyers’ fees, so there is still some risk – ATE insurance can help with this.

ATE covers the legal costs of bringing or defending litigation and can be purchased after the dispute has started. ATE is usually reserved for higher value cases which have a decent chance of success. The premium is not always recoverable and depends on the date of the policy and offers some but not complete assurance.

CFAs (“no win, no fee”), generally outline that you pay your lawyer only if you win your case. You do have to pay a success fee, however, which is based on risk. The success fee is not always recoverable from the other side but depends when the CFA started.

Third party funding is where a commercial funder agrees to pay some of your costs provided they get some of the returns.

Each option still bears a risk, but can enable litigation for people who are stuck between a rock and a hard place.