Litigation Funding Options
There are four basic ways in which you can work with a commercial litigation lawyer:
1. No-win, No-fee
Also known as a ‘pure Conditional Fee Agreement’ or ‘pure CFA’, this is often the most desirable option as the solicitor receives nothing if you lose. In these circumstances you can be sure that the solicitor is highly focussed on winning your case.
A solicitor working on this basis will be reasonably satisfied that the litigation has good prospects of success. If the solicitor acts for you on this basis it is usually possible to purchase an insurance policy (“ATE” insurance) to protect the business against the costs of losing the case.
Solicitors acting on a ‘no-win, no-fee’ basis are permitted to charge a success fee, which can be as much as 100% of the solicitors normal hourly rate. This is one of the main reasons why solicitors will run litigation cases on this basis. However, since the arrival of the Legal Aid Sentencing and Punishment of Offenders Act 2012 (LASPO), that success fee is no longer recoverable from your opponent, even if you are awarded costs.
Similarly, the cost of the premium used to be recoverable as part of your cost-recovery after trial. This too ended with LASPO.
These two factors must be considered when deciding how you wish to proceed.
2. No-win, Low-fee
Under these circumstances, the solicitor charges a low hourly rate with a success fee in the event that they are successful. Again, an ATE insurance policy to protect against the costs of losing the case can be acquired. As for pure CFA cases, ATE premiums and the success fee are no longer recoverable.
3. Hourly Rate
This is the classic, and still most common, method of charging. Under these circumstances the claimant is liable for the costs of the solicitor, calculated on the time spent on the case. Rates can sometimes be negotiated to reflect specific circumstances but generally the solicitor will want money on account of costs.
As with the contingency options, it can be possible to purchase ATE insurance to protect against the costs of losing.
4. Third Party Funding
Sometimes a solicitor would prefer to be paid either their full hourly rate or on a partial CFA basis by a third party funder. This provides them with a guarantee of at least some payment, regardless of the outcome of the case. It can also frighten a defendant into early settlement if it appears you have the financial backing to take a case all the way. There is a price to pay, though, as a litigation funder will typically want 25% to 40% of the winnings.
How PowerLegal can minimise your costs and your risks
PowerLegal has developed a panel of regionally located solicitors who are experienced in running litigation on a CFA (no-win, no-fee) basis. The solicitor firm needs to assess the litigation matter carefully before committing to an arrangement (as effectively they will be sharing the risk of losing with you) but once this is in place it is full steam ahead.
As part of our role, we assist the solicitor in sourcing an appropriate insurance policy to protect the business against the costs of losing the litigation case. These increasingly sophisticated insurance products have premiums which are only paid at the end of the case, either by the defendant as the losing party or waived by the insurer if the case is lost. Cover can be acquired for limits of indemnity of up to £2m (and beyond for large actions). We also assist in placing the case with a suitable third party funder should the client want to pursue that option.
To find out how Powerlegal can help you, either call us on 0800 177 7752 or fill in the webform. You will then be contacted by one of our commercial litigation solicitors for a free initial consultation.