Commercial litigation is costly and it is sensible to understand the costs of any proposed funding arrangement before signing up to it.
How Funders Calculate Their Return
The return that a litigation funder can expect to make from a case is usually expressed in two ways: as a multiple of the capital invested in the case (i.e. the amount that the funder has advanced) or as a percentage of the damages that are recovered in the case (i.e. the amount of compensation awarded to the claimant). Typically, the multiple of the amount of capital advanced is between two and three, although this can vary depending on the size of the case and the level of risk to the funder. As a percentage of the damages recovered, the normal range is between 20% and 40%.
What ATE Insurance Adds to the Bill
After-the-event (ATE) insurance protects you against your opponent’s costs should you lose your case. However, the premiums for such insurance are often deferred until your case is settled and can cost anything from 20% to 50% of the amount of cover you require. This means that the premium will be higher for weaker or longer cases.
Success Fees in Conditional Fee Agreements
Solicitors who enter into a Conditional Fee Agreement with a client can charge a success fee of up to 100% of their standard fees for conducting a claim. This additional success fee is charged on top of the standard fees for conducting a claim and is typically recoverable from an opponent. Where a claim is funded by a third party funder, such as those offering Litigation Funding London, then the client’s solicitor will also charge a success fee as they would under a CFA. The combined effect of the funder’s return and the solicitor’s success fee is significant and should be taken into account when calculating the net return to a claimant in respect of their claim.
What Affects the Final Cost
Costs are generally determined by the strength of a case, the length of time a case is likely to take and the amount in dispute. For an idea of what the court can award in terms of recoverable costs see GOV.UK’s guidance on costs.
Check the Agreement Carefully
Make sure you understand whether the funder’s return is capped, and under what circumstances you would repay the funding, as well as any other circumstances under which you would be liable to pay the funding costs and expenses even if you discontinue the proceedings.
There is more on Litigation Funding London at https://www.novo-modo.co.uk/litigation-funding-london.
Having a clear idea of the costs involved before you sign the agreement can help avoid unexpected costs.
