SMEs and private individuals are often confused about what litigation funding is, the role of a funder during the litigation process, and what terms such as CFA, DBA, BTE, and ATE mean.
To help you understand litigation funding and how it can benefit you, here is a list of FAQs both BMS Funding and Law Firms are asked on a regular basis.
What is third-party litigation funding?
Third-party litigation funding occurs when a third party, with no connection to your legal matter, agrees to fund all or part of your case. They are then paid a fee out of the proceeds of the damages award should you win your case.
Third-party litigation funding is advantageous to SMEs and individuals because;
- it allows them to pursue litigation in circumstances where they could not afford to finance the case (for example, against a large corporation or financial institution), and;
- the third-party funder assumes the risk of taking the case
BMS Funding provides funds directly to the Law Firm rather than the client; therefore, it is the legal practice borrowing the money, further mitigating your risk.
Is it legal for third parties to fund my case?
Yes, third parties can fund your case. However, any impropriety on the funders behalf, such as “wanton or officious” meddling in the case, disproportionate control or profit, or a clear attempt to corrupt justice (for example, being dishonest regarding the details of a personal injury to inflame damages) would result in the funder being potentially liable under the legal doctrines of Champerty and/or Maintenance. This ensures clients are fully protected in their dealings with litigation funders.
BMS Funding operates under a strict code of ethics which puts the interests of the client and public trust in the legal system first and foremost in all its dealings.
Are third-party litigation funders regulated?
Third-party litigation funders are not required to be regulated. They apply a voluntary code of conduct and most sign up to the Commercial Litigation Association. In addition, some funders – dependent upon how and who they fund, may be regulated by the Financial Conduct Authority and the Claims Management Regulator.
What is the difference between a CFA and a DBA?
A Conditional Fee Arrangement (CFA), which is commonly known as a ‘no win, no fee’ arrangement, applies when a Law Firm provides legal services on the basis that if you lose your case you will not pay for legal fees. You are still liable for disbursement costs which are typically rehabilitation, expert reports and similar, but you are likely to be insured against those via the After the Event (ATE) policy. A Solicitor will charge a ‘success fee’ if you win your case in a CFA arrangement, but these are strictly controlled.
Damage-Based Agreements (DBA) are used when the Solicitor and the client share the risk of litigation. The Solicitor will agree a percentage of damages they will receive from a successful claim, and the client and Solicitor will agree a defined success criterion when entering into the DBA.
What is the difference between BTE and ATE insurance?
Before The Event (BTE) legal insurance is often linked to other insurance policies such as car insurance or business insurance. It is designed to provide cover in the event that the policy holder has the need for legal advice in the future. After The Event (ATE) insurance is taken out when the policy holder knows they need legal support because an event has happened, i.e a car accident or maybe a contract dispute. It is therefore more expensive than BTE cover. The premiums on ATE cover are only paid if you win the case. Both policies protect claimants against having to pay the other side’s cost if they lost their case and provide insurance against your own disbursement costs
Do I have to choose a solicitor from funders panel?
Although BMS Funding has relationships with highly experienced, successful Law Firms, you are free to choose your own solicitor, and this will make no difference to whether your case is granted funding.
Can I approach a funder directly, or should I go through my Solicitor?
You can choose to approach BMS Funding directly, or you can talk with your Solicitor about funding options for your case.
How will my claim be assessed for potential funding?
Because a funder is carrying the risk, all cases must be carefully examined to determine their strengths and weaknesses. At BMS Funding, potential cases are reviewed by a Solicitor, Barrister, an insurer, and by our own case analysts.
Having such a thorough assessment proves a great advantage for claimants who have their case backed by a funder, as it is clear they have a strong potential to win. This naturally provides them with extra clout at the negotiating table, and can lead to an early, highly favourable settlement.
To find out more about commercial litigation funding, please contact us on 0333 222 5731 or talk to your solicitor.
BMS Funding works with the legal profession and businesses to provide funding solutions for all market sectors.