England and Wales
The UK litigation landscape is marked by several key trends. A significant rise in insolvency, fraud, and enforcement cases is anticipated, likely influenced by the economic aftermath of the pandemic and persistent financial pressures. Additionally, there is an increasing demand for alternative legal fee structures, and we are clearly positioned to take advantage of these trends.
The ongoing geopolitical conflicts, particularly involving Russia, continue to impact the litigation scene, with English law remaining a preferred choice for governing contracts and resolving disputes. Moreover, technological advancements, especially in AI and crypto-assets, are expected to become more prominent in legal proceedings, and Eversheds Sutherland in the UK have been early adopters and users of AI, and are involved in a number of crypto disputes.
1. Is third party funding permissible for disputes?
Yes, third-party litigation funding is permissible and the UK represents the 2nd largest funding market in the world.
The market is largely dominated by the Association of Litigation Funders’ (ALF) members. These include Augusta, Asertis, Balance Legal Capital, Burford Capital, Harbour, Omni Bridgeway, Orchard and Woodsford.
At present, there is no legislation regulating third-party funding in the UK but a recent Supreme Court decision in a case called PACCAR, which found that funding agreements which provide for a percentage of damages are DBAs (see below) and unenforceable, has highlighted the need for legislation and regulation.
The PACCAR decision led to draft legislation which would have reversed its effects, but with the change of government in the UK, that legislation has not come into law.
However, and despite this decision, the third party funding market remains strong and continues to grow.
2. Are lawyers able to work on a contingent basis in the jurisdiction and are there any restrictions?
Yes, lawyers in England and Wales can work on a contingent basis either under a Conditional Fee Agreement (CFA) or a Damages Based Agreement (DBA).
Both are success based models where the lawyer’s fees, or part of them, are conditional on the outcome. They can be complete no win no fee agreements or partial fee agreements. Under a CFA the lawyer is paid a success fee of up to 100% of its basic fees and under a DBA, lawyer’s fees are based on a percentage of any monies recovered from legal proceedings and can be up to 50% of that sum.
CFAs are a well-established form of funding having been available since 2001. DBAs only became lawful in 2013 but uptake has been limited. DBAs are only available for claimants whereas CFAs can be used by claimants and defendants alike.
3. Can the court or tribunal order one party to pay the other’s legal costs?
Yes, in England and Wales, the court or tribunal can order one party to pay the other’s legal costs. This is generally at the court’s discretion. Whilst the loser generally pays the successful party’s costs, the court will take into account factors such as conduct and degree of success.
The quantum of costs to be paid is generally fixed for cases with a value below £100,000, but for larger cases, courts can take an active role in managing cases and budgets, and costs can be subject to a formal process of assessment, with specialist advocates and judges.
4. Is insurance available to protect against adverse outcomes for funded litigation?
Yes, insurance is available in England and Wales to protect against an adverse outcome and in particular, meeting the costs of the successful counter-party. This is often referred to as After-the-Event (ATE) Insurance. Premiums can often be fully deferred and only payable in the event of a Win such that ATE is an attractive product for parties seeking to mitigate the risks of litigation.
Contact
Glenn Newberry Partner
Head of Costs and Litigation Funding
Mark Davenport Partner
Co-Head of Global Litigation
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