Any would be litigants have to consider the costs involved in running a claim and the potential for a large legal bill. A successful claim can see you recovering any sums owed with interest and part of your legal costs from the other side. It can be hard to predict the costs of claims in commercial litigation or arbitration but there are several options available for funding your litigation.
In the majority of cases the normal position will be that legal fees will be charged in accordance with the time spent on a matter at an hourly rate. Bills will then be raised on a monthly basis according to the amount of time spent on the file every month.
Where appropriate a fixed fee arrangement may be offered to cover each stage of a claim at a fixed price which will allow for a greater deal of clarity of the costs involved in a claim.
Conditional Fee Agreement (CFA) or Damage Based Agreement (DBA)
A CFA is an agreement between an individual and their solicitor, where the solicitor agrees not to charge if you do not receive damages. In consideration of the risk taken by a solicitor that it may not recover its fees, a success fee is added on top of the normal legal fees payable. It is also possible to have a partial CFA where a lower hourly rate will be billed during the course of the litigation but on conclusion if the case is settled or decided in your favour then a success fee will be recoverable on top of the normal hourly rates chargeable.
Similar to a CFA, a DBA is an agreement between an individual and their solicitor, where the solicitor agrees not to charge if we do not receive damages. However, if you do recover damageS, under a DBA the amount of legal fees you pay will be determined by reference to a percentage of the amount of the claim recovered by you.
Legal insurance can be taken out before or after the event. Cover is sometimes provided as part of your car, contents or building insurance and it is always a good idea to check with your insurer whether you have any legal cover under any insurance policy you hold.
It is also possible to take out after the event insurance (ATE insurance) to insure against the possibility of being ordered to pay the other side’s costs if the other side wins.
Third party litigation funding
There are companies who invest in litigation in return for a share of the damages recovered.
This is often suitable for cases above a certain size where the prospects of success are high and where the opponent is likely to be able to pay any costs ordered. Third party funders will often insist on having input in the running of the case and any terms of settlement as their funding will generally cover all or a large part of your costs, insurance and any liability for costs payable to your opponent.