UK: A Few Things To Avoid When Considering Funding

In the Professional and Financial Disputes team at Clyde & Co, we sometimes see litigation funding from the opposite end of the telescope in circumstances where the prosecution of a case has gone awry. We have drawn from this insight in preparing this article. For convenience, we refer to litigation within this article but the issues we address are equally applicable to arbitration.

The funding market has developed rapidly in recent years, so that there are now lots of different funding packages available for both high and low value claims, and many professional litigation funding companies have been established in jurisdictions throughout the world. Some funders will focus on a niche specialism, for example, insolvency litigation, whilst others will fund a wide range of commercial claims. Many third-party funders are now also (post-Jackson) offering integrated policies which provide both funding for own costs and indemnity against adverse costs (also known as after the event, or ATE, Insurance).

Litigants in the market for litigation funding should be aware that a funder's success fee will likely be a multiple of the amount invested and/or a percentage of the amount recovered - reflective of the likely risk - and that the costs of litigation funding can vary dramatically from funder to funder. Often, success fees will be staged, with lower sums due, the earlier the proceedings are resolved. It is essential that litigants seeking funding properly consider the various funding options available to ensure that any success fees they may be required to pay are reasonable. Litigants should also consider whether or not the funder has immediate access to funds, where the funds are coming from (that is, direct from the funder, or from other third parties), how much funds are available, and whether the funds to be provided will indeed be sufficient - placing an additional emphasis on the importance of early and accurate costs budgeting, where possible. Litigants seeking litigation funding may find it useful to consider those funders which are members of the Association of Litigation Funders of England and Wales (an independent body charged by the Ministry of Justice, through the Civil Justice Council to deliver self-regulation of litigation funding in England and Wales). Members of the Association are required to follow the Association's Code of Conduct. However, there are other legitimate and sensible funders, which are not members of the Association. Notably, solicitors are obliged to inform their clients about the availability of litigation funding at the start of a case.

The increased use of third-party litigation funding is necessarily adding a new layer of complexity to both litigation and arbitration. There is currently no requirement upon litigants to disclose their funding arrangements. However, if a litigant does become aware that its opponent is funded, this may shed a new light on the assessment of the case's merits, since funders are generally unlikely to take on unmeritorious cases (funders very often seek to fund only those cases which they have been advised have prospects of success in the vicinity of 60% and above). That is because, third-party funding arrangements are usually provided on a "non-recourse" basis. That is, the funders' only recourse will be against the proceeds of the claim. Therefore, if the case is lost, the funder will lose its investment and is owed nothing by the litigant.

Funded claims can be more difficult to settle, in circumstances where litigation funders may not properly understand the complex issues which can arise in commercial claims, and on receiving favourable but limited legal advice, may have a strong appetite for trial. However, in the aftermath of the highly publicised Excalibur litigation, third-party funders will, no doubt, now be very aware of the risk that they may themselves be ordered to pay adverse costs orders on an indemnity basis - even in circumstances where they were not themselves responsible for the matters giving rise to that order. Consequently, the Excalibur decision may encourage greater focus by funders on the elements of a claim which are likely to fail and result in an indemnity costs order. This may assist to provide leverage for litigants seeking to resolve funded cases outside of Court or arbitration.

Funders may also now give increased consideration to how heavily they monitor claims. Although, increased scrutiny of cases by funders may cause them to stray into the forbidden fields of champerty and maintenance, which would render the funding agreement void and unenforceable, and leave the funder liable to pay the full amount of the costs of the successful party.

Finally, litigants should be wary of sharing their privileged information with prospective funders. A "joint-interest" for the purposes of privilege is likely to arise once the funding agreement is in place. However, this will not apply to communications which pre-date the funding agreement. Accordingly, it is important to be aware that sharing privileged information with a prospective funder may result in a waiver of privilege.

We will be watching closely how the dynamics of litigation-funded claims play out in order to feed this into our strategic approach to resolving future claims.

This article was first published in Clyde & Co's International Arbitration 1/3LY. Please click here to read the publication.

A Few Things To Avoid When Considering Funding

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
Ferguson Litigation Funding Ltd
Ferguson Litigation Funding Ltd
Holman Fenwick Willan LLP
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Ferguson Litigation Funding Ltd
Ferguson Litigation Funding Ltd
Holman Fenwick Willan LLP
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions