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Litigation funding (‘funding’) is money in the form of an investment that enables a litigating client or the client’s Solicitor to prosecute a legal action. Funding can unlock the door to achieving a balance between risk and reward when proceeding with a legal action.
Sometimes, without sufficient funding, access to justice is denied because you don’t have the means or the nerve to see your case through to conclusion (or the financial muscle to stand up against Goliath).
Alternatively, you have the money but don’t wish to release capital to pay litigation costs; you want to use the money in other ways – funding gives you that option.
Funding is non-recourse, which means it is secured against the successful outcome and physical recovery of proceeds. In the event of a ‘win’, the Funder requires their money back plus a return on their investment; in the event of a ‘loss’, the Funder loses their money and you will normally have no liability or debt to the Funder.
Litigation Funders will consider bearing the cost and the risk for a single claim or a portfolio of recoveries.
Litigation Funding can be complicated and time-consuming to arrange. ULP are experienced Litigation Funding Brokers who will ensure that the process is streamlined.
With our expert knowledge and insight into how each Funder operates, ULP can save you valuable time and money by going to the right Funder at the right time. Most Funders require an element of exclusivity and therefore approaching the most appropriate Funder for your individual case first is vital to avoid delaying the progress of your litigation.
ULP will take time to understand your risk appetite, tolerance and budget to deliver a package that suits your individual requirements. Usually this means negotiating a solution which enables you to retain as much of your winnings as possible. ULP are aware of the different returns on investment required by different Funders and can advise how this will affect your proceeds.
ULP will manage your expectations and keep you fully informed of the progress of your enquiry. Funding can be time-consuming to arrange and is not commercially viable for all litigation cases. ULP will help you to understand and assist you through the process.
ULP have extensive experience in the field and have strong relationships with most, if not all the Funders. We are in constant dialogue with both established Funders and new entrants into the marketplace so that we are aware of their appetite at any given moment in time. We will use our knowledge to ensure the best possible outcome for you.
In addition to arranging Funding, ULP are also a specialist After the Event (ATE) Insurance Broker and we will source any ATE required to support your litigation. In most cases the Funder will insist that ATE cover is arranged to protect against the adverse costs exposure and this may form an integral part of your Funding application.
ULP’s Proposal Form is accepted by all Funders and Insurers. It may pay to seek a Consultancy Report from ULP to assess the likely cost of Funding as opposed to alternative options.
Litigating Claimants – who need financial assistance when pursuing their Opponents.
Solicitors – can insure a portfolio of risks.
In-House Counsel – a number of claims are not pursued because of the cost and risk of doing so, but Litigation Funding can unlock this potential. Change your legal function from being a cost centre into a profit centre!
Private Equity Firms – good claims are left untouched when many of them could be run, paid for, and insured at no extra cost to the business. The cost of litigation can be removed or, at least, minimised from the balance sheet along with any provision made for adverse costs liability. Any recovery made is then added straight to the ‘bottom line’.
In order for us to seek offers of Litigation Funding for you, please ask your Solicitor to complete a Proposal Form on your behalf and return it to us.
We charge a Fee of £250 (no VAT) for providing our Funding broking service for each Proposal submitted to us.
Because any Funder is likely to insist that you take out ATE Litigation Insurance cover to – at least – cover your Opponent’s Costs (should you lose your legal action), or to pre-empt that you will want protection in any event, the Proposal Form includes certain ATE related questions as well as Funding related questions.
We have compiled a list of frequently asked questions and answers. But if your question is not listed, do call or email us.
Whilst the pricing for all funded claims is bespoke, the cost is normally determined by one of two methods. Time based Investments/Return on Capital and a return or Investment as a percentage of damages
In this model, the Funder will look for their money back as a minimum plus a multiplier of the amount they have committed to invest or have actually invested. The multiples range from 1X return on investment for claims which run for a short time to 5X return on investment for claims which run over a longer term. The multiplier increases at agreed time intervals throughout the duration of the claim until the proceeds of claim are paid.
In this alternative model, the Funder will look for an agreed percentage of the proceeds recovered on successful conclusion.
The factors which form the foundation for determining litigation funding cost are the following:
No, Funders have expertise in different areas of law and this can drive their appetite for certain risks. Typically, the more competent the Funder is in a particular area of law, the more efficiently they will complete their due diligence process. It follows that for funded claims, the more experienced Funders require less involvement and less engagement time with the Solicitor as the case progresses.
Most (but not all) Funders require the litigant to purchase an ATE insurance policy to protect them in the event of a loss, at the very least in respect of the Opponent’s costs. The ATE policy can either be paid in part or in full at the point of inception or deferred until conclusion and conditional upon the success of the claim.
Some, but not all, Funders require you to commit to a period of exclusivity from the outset. The period allows them to carry out their due diligence on your claim safe in the knowledge that they have first refusal. The period of exclusivity can either be for a defined period of time or until the Funder has decided to offer or decline to offer terms.
Other Funders will offer indicative terms subject to a further period of due diligence and it is at this point they will ask for a period of exclusivity.
A break fee can be applied where the Funder has offered terms which are not then taken up. This fee is intended to cover the costs incurred during the due diligence process.
Disputes typically pursued with a funding solution are not limited to, but include, commercial contract, professional negligence, insolvency, shareholder disputes, misfeasance claims, intellectual property, competition claims, group actions and (international) arbitrations.
If the Funder understands the claim, if they believe the claim has a greater chance of winning than losing and if they are confident that you will recover the proceeds from your opponent, then your claim can be considered. Claims recoveries where the amount of damages to legal costs ratio is 4:1 (or higher) work best for funding (and also for insurance).
Other Funders will offer indicative terms subject to a further period of due diligence and it is at this point they will ask for a period of exclusivity.
A break fee can be applied where the Funder has offered terms which are not then taken up. This fee is intended to cover the costs incurred during the due diligence process.
The UK Litigation Funding market consists of on-shore and off-shore investment vehicles. The financial backing of Funders ranges from AIM listed organisations supported by institutional investors to funds backed by private equity or private family wealth.
Litigation Funding has now come of age in the UK, and it is developing with the full support of the UK Government and the Ministry of Justice.
Whilst ULP prefers to put forward Funders who follow a voluntary code of conduct, this is an unregulated market and because of this you need to make sure that the Funder you choose has no restrictions on capital adequacy.