Litigation funding - Q & A guide
What is litigation funding?
Litigation funding by a third party is the easiest form of litigation financing to understand. In its simplest form investors put up the funds for you to bring a case and in return they receive a share of the damages / settlement you receive.
Who are the litigation funders?
The funder is a party that has not involvement with the dispute. They usually are investors, private equity funds, hedge funds and private investors. There has recently been an influx of specialised litigation funders entering the market to funds high value litigation.
Who can use litigation funding?
Anyone. Litigation funders do usually limit the financing to claims that are valued in excess of £250,000. Many funders out there are now looking at claims significantly lower given the upsurge in popularity / return in these types of financing arrangements.
Will I get funding for any claim?
Unfortunately not. Funders see the payment of your legal fees as an investment and therefore want to see a reasonable rate of return. Much the same way as any legal expense insurance policy you must have reasonable prospects of successfully bringing and/or defending a claim.
How long will a decision take?
Usually from you first approaching Stephensons to submitting your application and receiving a decision will take up to 2 weeks, if not much sooner. However the funder will undertake their own due diligence into the dispute which may increase this time.
Will I have to pay any legal fees myself?
From the point a litigation funder is accepted then all the legal fees will usually be paid by them. In certain circumstances (usually down to the prospects of a case) a funder will ask you to pay a proportion of your legal fees (sometime a small percentage) which limits both their exposure and also any damages that you may have to pay back to them.
What is the usual share of damages that the funder will recover?
Funders have traditionally looked for a return of between 4:1 - 10:1 but this is changing in favour of litigants and depends on the size of the dispute / risk involved in the litigation. We can however help you negotiate between the expected damages in a case and the legal costs.
Does the funder control the litigation?
No, a funder will not have any rights to control the litigation or force you into accepting a settlement proposal. The law relating to this is very clear.
Will the funder pay the legal fees I have already incurred?
Not typically, however on occasions if presented with the right case / investment they can be persuaded to pay for costs incurred.
Will the funder take on my case if it has already started?
Yes, but it is usually in your best interests to apply sooner rather than later.
Must my funded case proceed to trial?
No, settlement is solely a decision for you to make although naturally, the funders do like to see the cases settled as quickly as possible.
If my case is unsuccessful, will I have to repay the funder?
No, a funder will only be paid if there are successful. You may however be required to pay a proportion of your opponents legal costs depending on the deal you have with the funder.
If you need any further information on issues relating to litigation funding please contact our specialist solicitors on 0203 816 9303.