Legal costs - available funding options

Funding claims in litigation or arbitration

This note is a general guide produced by M&S Solicitors to the various methods of funding commercial claims that are now available.

Damages Based Agreements

Under these arrangements if you obtain damages or some other financial benefit then, and only then, do you pay a percentage of the sums you recover. So, for example if you recover £100,000 and the agreed percentage is 25% your fee will be £25,000.

Conditional Fee Agreements

In these agreements, the amount you pay is different if you win or lose. There are a number of variations that are used to match particular cases. There are no win no fee arrangements, no win low fee arrangements, or no win expenses only agreements.

More often than not there will be one fee payable if you lose and another, much higher fee due if you succeed with your claim. You will have to fund the difference between the lower and the higher fee yourself as that shortfall cannot be recovered from your opponent.

Legal Expenses Insurance

There are two types of legal expenses insurance: before the event and after the event.

Legal expenses insurance that comes with your household insurance is one example of before the event insurance. It will usually fund your lawyers and provide some protection against the costs of losing a claim.

After the event insurance is also available. If you have a claim you want to bring or one you need to defend then you may be able to obtain insurance to cover your legal costs or the costs that you must pay the other side if you lose, or both. The premiums for this type of insurance are often substantial.

After the event insurance can be and often is linked with other types of funding, particularly conditional fee agreements and third-party funding arrangements.

Third-Party Funding

Under this type of agreement your lawyers’ costs and your out-of-pocket expenses are paid by an independent third party who, in return, will typically take a share in what you win and charge interest on the money they advance.

Until recently these arrangements had been confined to large claims but a market is now developing in disputes involving relatively small amounts. They are usually only appropriate for businesses and individuals who have a claim to bring rather than those who need to defend a claim.

You should carefully consider all of these arrangements and the fixed fee or hourly rate charging schemes that we can offer to decide which is most appropriate arrangement for you.

You should carry out a careful risk assessment and cost benefit analysis before ever embarking on any litigation. One of the advantages of using alternative methods of the funding is that a third-party funder will have checked our assessment of your case and the chances it has of succeeding before deciding to share the risk with you.

In all of these arrangements you will give up some of the control you have over your claim. If we, or any third party, is taking over part of your risk then it is reasonable to expect them to have some control over that risk, particularly the amount of any final settlement.

M&S have built strong links with a market leading third-party funder and the firm has been helping clients bring litigation by sharing the risk with them and providing funding from our own sources for many years - disputes are the core of our business.

 If you or your clients and contacts use this firm you will no longer need to walk away from a claim simply because you can’t afford to run it.

In most cases we don't charge for an initial meeting to identify your objectives. Once we understand the case, we can agree the most appropriate payment arrangements.

We will be happy to discuss any claim you have on the telephone at any time and without obligation.

If you would like any further information please call Rob or Andrew on 01530 266000.

This note was correct at the time it was prepared but this is a topic that is changing rapidly and you should always take legal advice before making final decisions about funding litigation or arbitration.