The Basics Of Litigation Funding

Author:Mr Christopher Coffin and Nicola Haye
Profession:Withers LLP

Litigation costs in England and Wales

Some individuals and all businesses and organisations have to deal with disputes from time to time and most will seek successfully to resolve these by negotiation, mediation or informal routes. As a last resort, a formal resolution in the civil courts may be necessary, but only after a careful analysis of the costs of doing so.

It is important for those responsible for making the decision to go to court to understand not just how much a case might cost but also the various ways in which those costs can be funded (and potentially recovered from the opposing party) and how these funding choices can affect the progress and the cost of the case and the likelihood of settlement in particular.

Costs of litigation

The English Civil Procedure Rules 1998 (CPR) define costs in Rule 43.2 as follows:

'costs' includes fees, charges, disbursements, expenses, remuneration, reimbursement allowed to a litigant in person under rule 48.6, any additional liability incurred under a funding arrangement and any fee or reward charged by a lay representative for acting on behalf of a party in proceedings allocated to the small claims track.

In practice, litigation costs are typically represented by three elements:

your own legal advisers' fees expenses – commonly referred to as disbursements, eg court fees, barristers' fees and expert witness fees your opponent's legal fees and disbursements. The presumption under the CPR is that in most cases the party who loses the case (or an interim application) will be ordered by the court to pay the costs of the successful party. Such orders are commonly referred to as 'adverse costs' orders and the presumption often known as the "English Rule". Costs ordered to be paid by one party to another are subject to assessment by the court and generally amount to between 60 and 90% of costs actually incurred.

In recent years, the method that a party uses to pay both its own litigation costs and any adverse costs has become known as 'Litigation Funding'. But this is also the label applied to a specific and relatively new source of funding.

Funding options for litigation costs

Public funding (ie Legal Aid) Legal expenses insurance (often referred to as LEI, BTE or ATE) Trade union or professional organisation funding Lawyers' fee arrangements Traditional pay-as-you-go Fixed fee Conditional fee agreements (called CFAs) Third party funding (known as TPF) Public funding for civil...

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