In the UK, it is easy to access a commercial litigator, but a lack of understanding around funding means clients cannot always access it.

What is litigation funding?

Also known as litigation finance or third party funding, litigation funding is when a third party finances the whole or part of a litigant’s legal costs. In return, they receive a fee which is payable from any proceeds recovered. Litigation funding plays a vital role in ensuring there is fair access to justice, and it means that businesses facing any sort of commercial dispute can manage the legal costs. However, some business owners may feel it’s not for them, because of some common misconceptions.

High cost

Many companies feel litigation funding is just too expensive for them to consider, but the cost varies depending on the case. The agreed fee for success in a claim can be competitive and while funders will want a return on their investment, they also recognise that they want to earn a reputation for fairness. It’s worth asking experts on litigation funding to get a steer on how they charge. Some funders charge a simple rate of interest, while others ask for a percentage of any damages awarded or a multiple of what they’ve put in, whichever is greater.

Complicated process

Another myth is that applying for litigation funding takes too long, but funders are trying to improve their application processes so a decision can be made quickly. They will often arrange for case analysts to meet with clients early on, to assess the case and come up with a realistic budget.

Inability to repay

If a case is unsuccessful, businesses fear they won’t be able to repay the funder, but most litigation funding is what is called non-recourse. This means that the funder does not get repaid their investment if the case is not successful.

Extra costs

Going to court can be expensive, but businesses can mitigate against any extra costs by taking out After The Event insurance, which covers any costs in the case of a loss.