ALTERNATIVE RISK MANAGEMENT BY THIRD PARTY FUNDING

Third party funding continues to be a ‘hot topic’ in the legal sector and it is now permeating its way into discussions around tables in boardrooms and in-house legal departments as an alternative approach to risk management of disputes. This article provides a brief introduction to third party funding and how it may provide an alternative solution to a company with a claim. It outlines the key information that should be provided to a funder to ensure that they can properly assess the claim and provide a decision promptly.

What is third party funding?

Third party funding can be for claims subject to litigation or arbitration, domestic or foreign. This article focuses on third party funding for disputes within the jurisdiction of England and Wales but that should not be taken to mean that it is not already an established alternative means of financing disputes in many foreign jurisdictions (although there may be differences between jurisdictions on the use and scope of third party funding).

Funding can take many forms. The most common type is where a funder will agree to cover the costs of bringing a claim in return for a share of the proceeds if the claim is successful (through judgement, award or settlement). It is not a loan, so if the claim does not succeed then the claimant is under no obligation to repay the funder the amount invested. Over time, different forms of funding have developed which can be tailored to a claimant’s particular circumstances and preferences.

The specific terms of the funding will be agreed between the funder and claimant as a matter of contract. It may also include for the provision of after the event (ATE) insurance which will cover any order for the claimant to pay adverse costs if the claim is not successful. This insurance is important as, coupled with the funder’s agreement to cover the claimant’s legal costs, it provides the claimant with a ‘belt and braces’ package of protection against the risk of bringing the claim.

Apr-Jun 2016 issue

Harbour Litigation Funding