Third party funding is an alternative method of litigation funding where a commercial funder with no connection to the proceedings will pay some or all of the costs of your case in return for a share of any sum of money awarded in damages if you win your case. It is available to both claimants and defendants with a counterclaim and can cover arbitration as well as court proceedings.
Third party funders will fund both your legal fees and disbursements on an ongoing basis. In addition, they will bear the risk in terms of your opponent's costs of the litigation by offering an indemnity or paying for an insurance policy which should meet your costs if the case is unsuccessful. This arrangement differs from a conditional fee agreement with after the event insurance where a client is required to fund disbursements throughout the case although the insurer will refund them if it is ultimately unsuccessful. Funding under a conditional fee agreement may also require payment of a percentage of fees on an ongoing basis as well as disbursements. If a funder is involved in those circumstances, they will pay those fees on an ongoing basis as well as disbursements. The funds provided are not considered a loan as the money does not have to be repaid if the claim is unsuccessful.
The interim financing provided by third party funders therefore, provides an important distinction from other methods of funding and could be determinative of whether you are able to proceed with your claim.
Is third party funding suitable for my claim?
Third party funding comes at a significant cost and is not suitable for all cases. In return for funding the case the third party funder takes a significant share of the damages (typically 30 to 40%) which is not recoverable from the other party even if you win your case. The claim will also require strong prospects of success (usually 60 to 70%), a claim for substantial damages generally in excess of £500,000 and the opponent must have the ability to meet any award made against it.
Third party funding will be most suitable for high value claims against well resourced opponents where you do not have sufficient resources to bring the claim and in particular where you are unable to fund significant disbursements such as the fees of counsel and experts.
Advantages of third party funding
Whilst third party funding may initially appear an expensive option in that a claimant agrees to give up a proportion of any damages to the funder, this can be dramatically outweighed by the potential to unlock claims which could not otherwise be brought. It is an all too common occurrence for an aggrieved party with a substantial claim to be thwarted in bringing the claim due to a reluctance or inability to fund costly and open ended litigation against a well funded opponent.
The availability of third party funding provides a means by which unresolved claims can be pursued even if they have been dormant for some time, with little or no financial exposure and without a constant drain on cash flow. This allows funds which would otherwise have been used in pursuing the claim to further the objectives of the business. This is often preferable to abandoning a legitimate claim through lack of funding. In short, a partial recovery of damages is better than no recovery at all.
Access to third party funders
Third party funding arrangements can differ significantly between providers depending on the circumstances of each case and it is important to secure the best terms available in the market. We have relationships with many third party funders and access to all funders in the market place. As a result, we are ideally placed to arrange the most suitable and cost effective funding package for your needs.
Bespoke funding solutions
There are a number of funding options available for any dispute resolution process or litigation and we will aim to tailor a funding package to meet your needs.
Third party funding can be used alone or in conjunction with funding under a conditional fee agreement and/or after the event insurance. Where your claim is funded under any of these options (including Pannone's Advantage product) or as a combination of them your financial risk is shared or transferred entirely.
For more information see funding options for litigation and our Advantage pages.
To speak with a solicitor in the Dispute Resolution team about third party funding click here or call us on 0800 840 4929.
