The ability to transfer financial risk in a dispute is undoubtedly a significant and very positive development for anybody contemplating legal proceedings. However, whether you will choose to take advantage of one or more of the litigation funding options will of course depend on the cost. Not unsurprisingly, the party sharing your risk will also want to share in your success. The extent of the impact on your financial recovery will depend on the type and combination of litigation funding arrangement put in place.

Conditional Fee Agreement (CFA)

If you lose your case, you will only ever have to pay us our fees at the agreed discounted rate, plus expenses and VAT. If you are successful, you will have to pay us the discounted rate plus the difference between the discounted rate and our normal hourly rates, plus a success fee, expenses and VAT. All of these costs can be claimed from your losing opponent and are subject to the normal rules of costs recovery. (VAT is only recoverable from an opponent to the extent that you are not able to recover it from HMRC). The court may assess both the costs and the level of success fee claimed.

After the Event Insurance (ATE)

As with any insurance, you must pay a premium to obtain cover. The unique aspect of ATE insurance is that, if you lose the case and you have insurance, the insurer will cover you for your opponent’s costs and expenses that you may be ordered to pay, but it will ordinarily not charge you for this (i.e. it waives the premium). If, however, you do not lose the case, you will be liable to pay the premium to the insurer.

The premium for ATE Insurance is likely to be in the region of 20% - 60% of the level of cover that you need (i.e. enough to pay your opponent’s legal costs and expenses if you lose). Although this additional cost might at first appear unattractive, ATE insurers will normally be prepared to:

• defer payment of the premium until the end of the litigation and

• make actual payment of the premium contingent on success, so that it only becomes payable if you win your case

This would mean that although you are liable to pay the premium from the time that you enter into the ATE insurance policy, you do not actually have to pay anything unless and until the case is determined and then only if you win. Provided the ATE premium is reasonable, it will be recoverable in full from the opposing party. ATE insurance, if structured correctly, really is a "win-win" situation for you, whatever the outcome of the litigation. You will in effect have no premium to pay if you win (as it is recoverable from the losing party) and no premium to pay if you lose, even though you will have the benefit of the indemnity from the insurer.

Third Party Funding

In return for funding your own legal team’s costs and expenses, the third party funder will typically look to take approximately 3 times the amount it was prepared to fund or 25% - 40% of the proceeds that you recover from your opponent. This is a significant portion of your claim to give away, so you need to consider carefully whether you are prepared to enter into this sort of arrangement. Third Party Funding tends to be more suitable for larger claims, where the legal costs and expenses of bringing the case, whilst still high, are a small proportion of the overall claim value.