Got a strong claim (or claims) you aren’t pursuing because of the likely costs – or the risk of not winning? Tying up company money pursuing legal cases in these straightened times can be avoided using dispute financing – an increasingly popular way to pay for the cost of pursuing disputes by using a third party.
Clyde & Co is a leading global law firm specialising in the transport, infrastructure, energy, trade & commodities and insurance sectors. We have formed an association with LCM, a specialist in providing commercially viable tailored litigation finance. Together, our advisory services help clients create new business opportunities, de-risk litigation and release resources back into the business.
How does disputes funding work?
In a funded dispute you pay nothing towards legal fees as the case progresses – these are paid by a third-party lender who has no direct interest in the litigation. When the case is successful, the lender receives its investment back, plus a pre-agreed margin that reflects the risk incurred. You get all the rest. If the case is unsuccessful, the lender gets nothing.
- Reduced financial risk
- Preservation of cash for operating activities, rather than dispute resolution
- Provision of adverse cost indemnities
- Dispute costs are removed from the P&L and balance sheet “drag” is eliminated
- Funding is non-recourse
Traditionally, funders have financed single, isolated claims. Funding of a single claim carries a high degree of risk for the funder because if that claim is unsuccessful the funder will not recover its investment.
Multiple claims can be packaged into a portfolio and the financial risk for the funder is diversified across the book resulting in lower capital risk and therefore a lower return charged by the funder.
How it works:
- A portfolio typically consists of a minimum of three claims
- The funding costs for a portfolio are lower due to the decreased risk profile relative to a single case
- Cases may be added into a portfolio over time and the funding facility can be adjusted accordingly. A framework agreement can be created with just one case
- A portfolio can comprise different types of cases and include low value claims as well as defence cases