Key Takeaways
- Legal funding in the UK lets you pursue a claim without paying all legal costs upfront, widening access to justice for individuals and businesses.
- The main legal funding options are Conditional Fee Agreements (CFAs), Damages-Based Agreements (DBAs), and third-party litigation funding.
- CFAs, or ‘no win no fee’ agreements, mean you only pay legal fees if your claim is successful.
- DBAs allow your solicitor’s fee to be a percentage of any damages you recover.
- Third-party litigation funding means an external funder covers legal costs for a share of your compensation if you win.
- Strict regulatory and eligibility criteria apply to all forms of litigation funding.
- Not all funding options cover every risk or expense always check the terms and seek specialist advice.
- Our lawyers specialise in finding the most suitable funding arrangement for every litigation client in England and Wales.
- Our clients rate us Excellent on Trustpilot with over 130 five-star reviews and a 4.9/5 rating.
What Are the Best Legal Funding Options for UK Litigation?
Starting a legal claim in England and Wales often feels daunting due to uncertainty over costs. The right funding strategy can remove these barriers, making justice far more accessible. Failing to understand your choices can expose you to unnecessary risk, limit compensation, or even leave you unable to pursue a valid claim.
Legal funding in the UK covers a range of options: Conditional Fee Agreements (CFAs), Damages-Based Agreements (DBAs), and third-party litigation finance. Whether you are seeking redress as an individual, director, or business owner, understanding these funding methods is crucial for effective litigation.
Expert guidance is often decisive. For a discussion of the best funding strategy for your case, contact our specialist lawyers for a Free Consultation or speak directly with our London team.
What Is Legal Funding in the UK and How Does It Work?
Legal funding allows claimants in England and Wales to proceed with litigation without paying all legal fees upfront. Costs may be deferred, only payable upon success, or met by an external funder, depending on the chosen agreement. The main models are “no win, no fee” Conditional Fee Agreements, Damages-Based Agreements, and third-party litigation funding.
Each funding route carries distinct obligations and potential risks. Reviewing the terms in detail before signing is essential.
What Are the Main Types of Legal Funding for Litigation in England & Wales?
There are three predominant legal funding types:
- Conditional Fee Agreements (CFAs): Also known as ‘no win, no fee’, you only pay a success fee if you win.
- Damages-Based Agreements (DBAs): Your solicitor takes an agreed percentage of any damages you recover.
- Third-Party Litigation Funding: An independent funder covers legal fees, often in large or complex cases, for a share of your proceeds if successful.
Other options include legal expenses insurance, private funding, and even litigation crowdfunding in some circumstances. Suitability depends on claim value, chances of success, and regulatory compliance.
You may also find our article on UK Supreme Court determines that Litigation Funding Agreements (LFAs) are Damages-Based Agreements useful if you want to understand recent compliance changes.
Each funding mechanism works differently in practice, let’s examine each in detail.
How Does a Conditional Fee Agreement (CFA) Work in UK Litigation?
A Conditional Fee Agreement (CFA), commonly known as ‘no win, no fee’, enables you to defer solicitor fees until your case succeeds. If you lose, you typically pay nothing for the lawyer’s work though you may still be responsible for court fees or certain expenses unless otherwise arranged.
- In personal injury claims, the success fee is capped by law.
- In commercial claims, the success fee is negotiated and paid from your recovered damages.
- If your claim succeeds, the losing side may be ordered to pay part of your costs, but the ‘success fee’ element comes from your compensation.
- After-the-event (ATE) insurance is strongly recommended to protect against adverse costs should your case lose.
Let’s weigh the practical advantages and disadvantages of CFAs.
What Are the Pros and Cons of No Win No Fee (CFA) Agreements?
Pros:
- You pay no solicitor fees if your claim fails.
- Greatly reduces personal financial risk.
- Indicates your solicitor’s confidence in your chances.
Cons:
- A success fee is deducted from your compensation if you win.
- Only cases with strong legal merit will qualify for CFA funding.
- CFAs may not cover all costs (such as court fees or expert witness expenses).
For claimants seeking to link legal fees strictly to the compensation won, DBAs may be a viable alternative.
Damages-Based Agreements (DBAs): How They Work and When to Use Them
A DBA is a funding option where your solicitor’s fee is a fixed percentage of any damages you recover capped at 50% for commercial claims. Unlike CFAs, solicitors cannot claim any additional costs or top-up fees if you win.
This approach can appeal to claimants with significant damages at stake who wish to avoid standard hourly-based legal fees. Strict regulatory requirements control DBAs, and they may not be suitable for every matter.
Clients often ask about the likely fee deduction here’s how it works in practice.
How Much of My Settlement Could I Pay Under a DBA?
- In commercial litigation, up to 50% of the recovered damages (including VAT and barrister fees) can be claimed by the solicitor.
- In employment tribunal claims, the cap is 35%.
- No additional solicitor fees are allowed under a DBA, keeping the arrangement straightforward.
For those with high-value or complex claims, third-party litigation funding may be more appropriate.
What Is Third-Party Litigation Funding and Who Qualifies?
Third-party litigation funding allows an external funder usually a specialist financial institution to cover legal costs in return for a share of your damages if you succeed. This option mainly suits commercial claims over £250,000, insolvency actions, or major group litigation.
A strong merits assessment, substantial potential damages, and confidence in the defendant’s solvency are all prerequisites before an external funder will agree to support your claim.
For a deeper dive, you may find our Litigation Funding guide helpful.
Applying for litigation finance involves a structured process:
What Does the Litigation Funding Application Process Involve?
- Initial enquiry with your solicitor to assess claim viability and funding suitability.
- Submission of claim documents, contractual evidence, and damage calculations.
- Funders conduct thorough due diligence assessing claim value, prospects of success, and the defendant’s ability to pay.
- Terms of funding are offered, negotiated, and agreed, followed by contract execution.
- When approved, funding is released to cover litigation costs as agreed.
Assessing eligibility comes next here is what funders and solicitors require.
Are You Eligible for Legal Funding? Key Criteria and Suitability Factors Explained
Eligibility for legal funding depends on fundamental factors including:
- Merits: A strong likelihood of success; typically a 60%+ chance for CFA/DBA, 65%+ for third-party finance.
- Claim Value: Large enough to justify funding costs; frequently £10,000+ for CFAs, £25,000+ for DBAs, £250,000+ for third-party finance.
- Opponent Solvency: The defendant’s ability to pay is critical.
- Legal Representation: Only qualified, regulated solicitors can enter compliant agreements.
- Case Type: Commercial disputes and certain high-value personal claims are preferred; defendant-only claims and small claims are seldom funded.
| Funding Type | Minimum Claim Value | Eligible Claim Types | Success Rate Required | Opponent Solvency Required | SRA-Regulated? |
|---|---|---|---|---|---|
| CFA | £10,000+ | Most civil claims | 60%+ | Helpful | Yes |
| DBA | £25,000+ | Commercial, some employment | 60%+ | Helpful | Yes |
| Third-party | £250,000+ | Complex commercial, group actions | 65-70%+ | Essential | Yes |
If you are unsure about eligibility or want clear guidance on the best funding for your case, contact our expert litigation lawyers for a Free Consultation.
Understanding coverage is the next vital step – here’s what legal funding arrangements actually pay for.
What Costs and Risks Are (and Aren’t) Covered by Legal Funding Options?
Legal funding typically covers:
- Your solicitor’s and barrister’s fees in funded cases
- Selected court fees and some disbursements, by negotiation
- In many cases, after-the-event (ATE) insurance to protect against losing the claim
However, funding does not usually cover:
- All up-front out-of-pocket costs unless specifically negotiated
- Pre-action or abandoned proceedings costs
- Opponent’s costs if you lose, unless ATE insurance is arranged
Many disputes arise over exactly which costs are covered, especially for insurance and expenses clarity from the outset is vital.
Can You Fund Disbursements, Insurance, and Adverse Costs?
Most lawyers will recommend ATE insurance alongside funding to safeguard against adverse costs orders. Some funders may also pay for disbursements or insurance premiums, but this is not standard practice.
It is critical to only enter compliant funding agreements; let’s consider the regulatory framework.
What Are the Legal and Regulatory Rules for Litigation Funding in England & Wales?
All legal funding agreements must meet strict requirements:
- The Solicitors Regulation Authority (SRA) regulates CFAs and DBAs.
- Damages-Based Agreements Regulations 2013 detail binding standards for DBAs.
- The Association of Litigation Funders (ALF) Code of Conduct governs third-party funders.
- Transparency, fairness, and full disclosure of risk are mandatory.
Solicitors must explain all terms, risks, and alternatives in plain English before you sign. Failure to follow these requirements can invalidate agreements.
Clear regulatory rules help protect claimants at every stage.
How Do SRA and Other Regulations Affect Legal Funding Agreements?
- Act in the client’s best interests and avoid conflicts of interest
- Disclose all costs, risks, and potential funding alternatives in writing
- Reject any unlawful or non-compliant fee arrangements
Third-party funders regulated by ALF must show financial stability and adhere to high ethical standards.
Rapid action is crucial. Delay, or choosing the wrong funding mechanism, can bring significant consequences.
What Happens If You Take No Action, or Choose the Wrong Legal Funding Option?
Missing limitation dates, or selecting the wrong funding option, can result in lost claims or unforeseen legal costs.
If you need urgent eligibility advice or clarification, request an assessment from our specialist lawyers.
The evolving court approach to funding and costs disputes is best understood through leading cases.
How Have the Courts Treated Legal Funding and Costs Disputes? (Case Law Table)
| Case | Facts | Outcome | Why It Matters |
|---|---|---|---|
| Arkin v Borchard Lines Ltd [2005] EWCA Civ 655 | Claimant received third-party funding, lost, and was subject to a costs order. | Court limited the funder’s liability for adverse costs to the value they funded. | This case defines the limits of third-party funder exposure remaining costs risk sits with claimants. |
| Excalibur Ventures LLC v Texas Keystone Inc [2016] EWCA Civ 1144 | Non-party funders provided finance for a failed large-scale claim. | The funders were made jointly liable for adverse costs due to their control. | Demonstrates courts can order funders to pay costs, underlining risk for both funder and claimant. |
| Zuberi v Lexlaw Ltd [2021] EWCA Civ 16 | Dispute over enforceability of a DBA after settlement. | The DBA was upheld, provided its terms complied fully with 2013 Regulations. | Reinforces the importance of regulatory compliance DBA terms must be clear to be enforceable. |
Court decisions highlight the need for robust agreements and informed claimant choices.
Here’s how to secure litigation funding for your own dispute.
What Is the Step-by-Step Process to Arrange Litigation Finance in the UK?
- Book a Free Consultation with one of our litigation funding solicitors.
- Assess the merits of your case and the suitability of each funding type.
- Collate supporting evidence: contracts, loss valuations, correspondence.
- Submit funding applications (CFA, DBA, third-party) and supporting documentation.
- Review and negotiate funding terms, ensuring compliance with all regulatory standards.
- Arrange ATE insurance if required.
- Commence litigation, with costs and risks explained to you upfront.
A strategic approach to funding sets your case up for success. Here’s how we deliver results.
Our Winning Approach to Legal Funding UK
Our lawyers are leaders in legal funding innovation across England and Wales:
- Featured by the Law Society Gazette and LexisNexis for our sector insights.
- Fixed-fee reviews for funding agreements of any type.
- Secure document sharing using Go Transfer for client peace of mind.
- Direct WhatsApp access to your assigned litigation solicitor.
- Court-tested funding models, adapted to the value and complexity of your dispute.
- Strategic negotiation with funders and insurers for the best client terms.
- Transparent information: All costs, risks, and compliance points set out from day one.
- No-win, no-fee options for eligible claims.
Common questions are answered below for your convenience.
Frequently Asked Questions
Can a defendant obtain legal funding in the UK?
Although funding is most common for claimants, some defendants especially those facing high-value claims or counterclaims can qualify for third-party litigation finance.
Does legal funding cover court fees and expert reports?
It depends on the arrangement. Some funding options include court fees and expert costs, but others do not. Always specify coverage before committing to a funding agreement.
How long does it take to arrange third-party litigation finance?
From application to funding, the usual time scale is 2–4 weeks, depending on documentation and claim complexity.
Will a CFA or DBA affect my damages if I win?
Yes. Success fees or agreed percentages will be deducted from your settlement as outlined in your agreement.
Is legal funding available for employment, property, or commercial disputes?
Funding is commonly available for commercial and some employment disputes. Property and probate claims can qualify if the claim is sufficiently valuable and well-supported.
What information do funders need to assess my case?
You should provide claim details, supporting evidence, litigation budgets, valuation of damages, details of the defendant’s solvency, and a solicitor’s assessment of your chances.
Are there minimum claim values for litigation finance options?
Yes. Third-party funding typically requires disputes worth £250,000 or more. CFAs or DBAs are generally available from £10,000 or £25,000 in value, depending on complexity.
How do I switch solicitors if I already have a funding agreement?
Switching is possible but may involve penalties or notice requirements within your agreement. Always get advice from our solicitors before making the move.
Will entering a funding agreement appear on public record?
Generally, funding agreements remain confidential and off public record, unless disclosure is ordered by the court in rare circumstances.
Can I negotiate the terms of a legal funding agreement?
Yes. All terms are negotiable, including fee percentages, thresholds for success, and cost coverage. Independent legal advice is essential.
Secure the Right Legal Funding for Your Case Today
Legal funding arrangements provide the financial confidence to pursue or defend valuable claims in England and Wales without risking your capital up front. Understanding each option and acting quickly within limitation periods may be decisive in recovering your losses.
Our solicitors have an outstanding track record guiding clients through every stage of the funding process, from eligibility checks to agreement review and strategic negotiation. If you would like advice on your legal funding options, or a fixed-fee review of an existing arrangement, speak to us today. Call 0207 459 4037 or use our online form to request a Free Consultation.
