Key Takeaways
- Litigation funding in the UK allows claimants to pursue commercial disputes without paying legal costs upfront, making access to justice viable where expense would otherwise be a barrier.
- Third party funders can cover your legal fees in exchange for a share of any recovery, with funding tailored for high-value or complex litigation.
- Not all cases are eligible for litigation funding; funders typically require strong legal merits, substantial claim value, and good prospects of cost recovery.
- Applying for litigation funding involves a detailed merits assessment, which may take a few weeks to several months, so begin early to meet limitation periods or court deadlines.
- Failing to explore litigation funding can mean missing out on claims or settlements, particularly where lack of capital is an obstacle.
- Conditional Fee Arrangements (CFAs) and Damages-Based Agreements (DBAs) provide alternatives to traditional third party funding and may be a better fit depending on your circumstances.
- Litigation funding is especially valuable in insolvency claims, commercial contract disputes, and group actions, where the costs of litigation could otherwise preclude a claim.
- Our firm is rated Excellent on Trustpilot with more than 130 five-star reviews and a 4.9/5 satisfaction rating.
- Regulatory protections exist for claimants using litigation funding in England and Wales, but it remains vital to seek independent legal advice and choose reputable, transparent funders.
- Our solicitors have deep experience guiding clients smoothly through litigation funding decisions and can deliver a bespoke eligibility assessment for your claim.
How Does Litigation Funding Work in the UK and Who Can Use It?
Potential claimants in England and Wales are frequently put off from asserting valid claims in court because traditional legal fees are simply unaffordable. Litigation funding now gives individuals, businesses, and groups a practical route to bring commercial disputes, with professional funders taking on the upfront financial burden and risk.
Litigation funding, sometimes called third party funding or litigation finance, involves an external funder agreeing to pay your legal costs in return for a share of any damages or settlement obtained. This funding is open to individuals, companies, insolvency practitioners, and class action groups, provided the case is strong enough and the claim value is substantial.
If you think your claim has value but aren’t sure if you qualify for funding, our team can deliver a tailored assessment of your options, typically within days of initial contact.
Understanding how litigation funding operates in practice is the next crucial step for claimants considering this route.
How Does Third Party Funding for Legal Claims Operate?
Third party litigation funding is structured among three parties: you (the claimant), the funder, and your legal team. The funder pays legal bills such as court fees, solicitors’, barristers’, and experts’ fees as the action proceeds. If you win or settle, the funder recovers their outlay and a pre-agreed fee or percentage of damages. Should you lose, the funder typically writes off their investment—your liability for fees is minimal unless otherwise agreed.
Process highlights:
- Initial Assessment: You or your solicitor presents the claim to funders for an assessment of prospects, claim size, and recoverability.
- Due Diligence: The funder assesses merits, value, and likely enforcement prospects.
- Negotiation: If approved, the parties define the funding scope, fees, funder’s return, and reporting obligations.
- Proceedings: As the claim advances, the funder pays bills in accordance with the agreement.
- Outcome: Success triggers funder repayment from your damages; failure leaves the funder to absorb its loss. Your liability for the other side’s legal costs usually requires separate insurance cover.
Understanding the basics enables you to consider which funding arrangement best fits your circumstances.
What Types of Litigation Funding Are Available in the UK?
Litigation finance in the UK now offers several flexible funding mechanisms, all regulated and widely used in commercial disputes:
- Third Party Funding: An external funder pays some or all legal costs in return for a share of damages or settlement.
- Conditional Fee Agreements (CFAs): Known as “no win, no fee,” these are arrangements with your solicitor to waive fees if you lose, sometimes with a success uplift if you win.
- Damages-Based Agreements (DBAs): Your solicitor’s fees become a set percentage of your recovery, capped by regulation.
- After the Event (ATE) Insurance: Insurance taken after a dispute has arisen, typically to protect against liability for the other side’s legal costs.
Hybrid models—blending multiple arrangements—are also common in high-value or complex matters, enabling strategic sharing of costs and risks.
Let’s clarify how CFAs and DBAs work and how they compare with third party funding.
What Are CFAs and DBAs? Practical Examples
A Conditional Fee Agreement (CFA) means your solicitor only gets paid if you succeed; if you lose, you owe nothing apart from sometimes disbursements and opponent’s costs. A success fee may apply but cannot exceed 100% of basic fees.
A Damages-Based Agreement (DBA) instead makes your lawyer’s fee a percentage of your recovery, typically capped at 50% for commercial cases under the Damages-Based Agreements Regulations 2013.
Both options differ from third party funding, where a separate funder covers costs in exchange for a share of damages.
You may also find our article on What To Do If Your Solicitor Has Been Negligent helpful if you are in dispute with previous legal advisors.
The next step is to clarify eligibility—for both the claim and potential claimant.
Who Qualifies for Litigation Funding and Which Cases Are Eligible?
Litigation funders in England and Wales fund only the strongest claims, focusing on:
- High merit (assessed chance of success)
- Sufficient documentary and expert evidence
- Defendant solvency and asset recoverability
- Claim values typically exceeding £250,000 (some require £500,000+)
These arrangements are open to individuals, SMEs, insolvency practitioners, and groups with commercial, insolvency, or professional negligence claims. Funders do not usually support family or injury claims, and only rarely fund defendants.
Our expert lawyers can provide a rapid, fixed-fee assessment of your case and prospects for securing funding.
Funders concentrate on cases where the likelihood of damages and defendant payment are high. Understanding which disputes routinely attract funding helps you target your application appropriately.
Which Disputes Attract Funders? (Commercial, Insolvency, Group Actions)
Funders generally consider:
- Commercial claims: Breach of contract, fraud, shareholder or director disputes.
- Insolvency matters: Liquidators or administrators seeking to recover assets or funds for creditors, such as pursuing unfair preferences, wrongful trading, or concealed assets.
- Group actions: Data breaches, financial mis-selling, or mass consumer claims where economies of scale apply.
- Professional negligence: Actions against architects, accountants, solicitors, or surveyors for losses caused by substandard advice or actions.
- Intellectual Property claims: Patent, copyright, or trademark litigation with substantial financial consequences.
Funders may also consider novel sectors such as crypto fraud and asset tracing where there is traceable value.
You may find our guide on UK Supreme Court determines that Litigation Funding Agreements (LFA) are Damages-Based Agreements useful for the latest high court developments.
Next, see what the application process involves.
How to Apply for Litigation Funding: Step-by-Step Process
The road to securing litigation finance mirrors preparing an investment pitch; compelling claims, robust evidence, and thorough disclosure increase your odds of approval.
Step-by-step process:
- Submit case outline and initial evidence to a prospective funder.
- Funder conducts a preliminary merits screening focused on value, legal prospects, and defendant solvency.
- If the claim passes, you will be asked to produce full legal advice, expert reports, budgets, and background due diligence.
- Funders may instruct external lawyers to conduct an independent assessment.
- Successful claims receive a formal funding offer, setting out the proposed funding, fee structure, conditions, and insurance requirements.
- On agreement and signing, the funder pays legal costs into a specified account, subject to agreed reporting milestones.
Our specialist funding team can oversee your application, minimising delays and increasing your chance of prompt approval.
Understanding timing and organisation helps you manage risk and costs—which brings us to costs and fee arrangements.
Costs, Risks, and Fee Structures in Litigation Funding
Funders only invest in claims where the expected return justifies the risk. Fee models most commonly are:
- Percentage of damages: Usually 20–40% of any recovery, but may be capped by agreement.
- Multiple on funding advanced: For example, two to five times the sum advanced.
- Hybrid approaches: Combining caps and multipliers for tailored outcomes.
Carefully budget for additional expenses such as ATE insurance premiums and any legal costs that the funder will not advance.
Risk highlights:
- Successful claimants give up a share of damages to the funder; consider if net recovery is worthwhile.
- Defeat (unless insured) may leave you liable for opponent’s costs if your ATE policy does not cover all losses.
- Some funders reserve contractual input into settlement or appeal decisions; negotiation on funder rights over case progression is key.
Our lawyers can benchmark funding proposals, review contracts, and negotiate better fee structures to protect your long-term interests.
Can Litigation Funding Cover All Legal Costs If I Lose?
Non-recourse litigation funding protects you from repaying advanced sums if you lose. However, unless you have adequate ATE insurance, you could still be responsible for the other side’s costs or any additional expenses above the funding cap.
Litigation funding usually covers:
- Legal team fees within the set budget
- Disbursements including court and expert fees
- ATE insurance premiums (sometimes advanced by the funder)
It generally does not cover:
- Opponent’s costs if your insurance lapses or is invalidated
- Expenses beyond agreed funding limits
- Costs resulting from rule breaches or failure to comply with the funding agreement
Thoroughly reviewing your funding and insurance protection can prevent nasty surprises after proceedings begin.
With cost and risk planning in place, it’s important to understand the legal and regulatory context before proceeding.
Key Legal Framework and Deadlines in Litigation Funding
Litigation funding arrangements are governed by contract law, but must also comply with relevant statutes and court rulings. Statutory and regulatory highlights include:
- Damages-Based Agreements Regulations 2013: Limits solicitor’s entitlement under DBAs to no more than 50% in commercial cases and prescribes what makes DBAs enforceable.
- Courts and Legal Services Act 1990: Regulates CFAs and how success fees can be recovered.
- Solicitors Regulation Authority (SRA) Standards and Regulations: Requires full client disclosure, avoidance of conflicts, and fair contractual terms.
- Arkin v Borchard Lines Ltd [2005] EWCA Civ 655: Introduced the “Arkin cap,” generally limiting a funder’s exposure to the amount they invested, though later cases have clarified its application.
- Limitation Act 1980: Imposes statutory time limits, such as 6 years for most contract and negligence claims, meaning delays in securing funding can risk a claim being time-barred.
Failing to observe statutory limitations or structure agreements lawfully may leave funding unenforceable or expose clients to risk. Reach out early to avoid missing deadlines.
How the Courts Assess Litigation Funding Agreements
Courts in England and Wales broadly support access to justice through litigation funding, so long as arrangements are transparent, fair, and within regulatory requirements.
| Case | Facts | Outcome | Why It Matters |
|---|---|---|---|
| Arkin v Borchard Lines Ltd [2005] EWCA Civ 655 | Funders supported expert fees but lost claim. | Funder’s liability for adverse costs capped at the sum funded. | Reduced cost exposure makes funding more attractive. |
| Davey v Money [2019] EWHC 997 (Ch) | Funding agreement challenged on termination/control. | Arkin cap may be lost where funder controls or oversteps fair practices. | Fair, transparent terms essential to defend against cost sanctions. |
| Chapelgate Credit v Money [2020] EWCA Civ 246 | Reviewed the automatic nature of Arkin cap. | Courts have discretion over funder’s adverse cost exposure. | Funders may bear wider costs risk—robust ATE insurance is vital. |
| Excalibur Ventures LLC v Texas Keystone Inc [2016] EWCA Civ 1144 | Funder backed weak claim. | Indemnity costs ordered against funders for unreasonable support. | Funders must perform proper due diligence. |
| PACCAR Inc & Ors v Road Haulage Association Ltd [2023] UKSC 28 | Scope of DBAs and collective action funding tested. | Some litigation funding agreements may be DBAs and void if non-compliant. | Ensures careful drafting and regulatory compliance. |
Request a case law analysis with your funding assessment for full clarity on how the latest legal trends impact your specific dispute.
Let’s now consider which clients and claims are best suited for funding.
When Is Litigation Funding Appropriate—and When Is It Unsuitable?
Strategic use of litigation funding depends on the strength of your claim, value at stake, and risk profile.
Ask:
- Is your case strong and well evidenced?
- Does the damages share left after funding justify proceeding?
- Can you comply with disclosure and reporting obligations during proceedings?
- Would a CFA, DBA, or hybrid approach offer a better overall outcome?
- Are there control or confidentiality issues that make third party funding unattractive?
Some claims—such as low-value or non-monetary remedies, or cases with unclear recovery—are rarely suitable for external funding.
Pros and Cons for Claimants and Defendants
Pros for Claimants:
- Access to premier litigation teams and experts without upfront cost
- Significant risk transfer, particularly for SMEs or cash-poor claimants
- Enhanced strategic strength and leverage
Cons for Claimants:
- Share of any settlement or award is surrendered to the funder
- Extra complexity in managing funder relations and reporting
- Funding applications can be time-consuming and disclosure-heavy
Defendants rarely benefit from funding due to lack of damages; facing a funded claimant may mean a more determined opponent.
If you remain unsure about funding vs. alternative models, we offer fixed-fee advice to clarify which option best advances your interests.
Choosing the Right Funding Arrangement for Your Dispute
Careful comparison of funding options is essential. Work through:
- Assess claim strength, value, and enforceability.
- Consider risk appetite and how much control you want over strategic decisions.
- Compare costs and the net recovery you will receive under each model.
- Obtain professional input on hidden charges or funding “veto” terms.
- Explore hybrid or bespoke arrangements if your dispute has unique risks.
Comparing Third Party Funders, CFAs, and DBAs
| Model | Who Pays Upfront? | Who Bears Main Risk? | Usual Damages Share | Control Over Case |
|---|---|---|---|---|
| Third Party Funding | Specialist funder | Funder (legal costs), client (damages share) | 20–40% or a fixed return | Client; funder may have consultation rights |
| CFA | Your solicitor | Solicitor (own fees), client (disbursements) | Success fee up to 100% | Retained by client |
| DBA | Your solicitor | Solicitor (own fees), client (costs/disbursements) | Up to 50% in commercial cases | Retained by client |
Next, safeguard your position with a focus on regulation and risk management.
Regulation, Protection, and Managing Litigation Funding Risks
Litigation funding in England and Wales benefits from the following protections:
- SRA Rules: Solicitors must act in your interest, declare all funding arrangements, and secure your independence of decision-making.
- ALF Code (voluntary): Leading funders follow the Association of Litigation Funders’ capital, transparency, and complaint-handling requirements.
- Judicial Oversight: Courts can scrutinise, adjust, or set aside unfair, champertous, or non-compliant arrangements.
- Practical Risk Management: Always instruct specialist lawyers to check draft agreements, especially clauses relating to fees, termination, control, and timeframes.
Arranging for a compliance and risk audit of draft funding agreements offers peace of mind and legal security. Our dispute funding team can deliver this review before you commit to any funder.
Why Work with Our Litigation Funding Experts?
Our approach is unique among UK litigation funding solicitors:
- Clear, fixed-fee funding reviews: Upfront quotes with no hidden extras, including contract analysis and eligibility audits.
- Secure online Go Transfer portal: Submit your documents and correspondence safely at any time, speeding up funding decisions.
- Direct WhatsApp solicitor access: Instant case updates, answers, and strategic input when you need them.
- Law Society recognised: Our team regularly features in the Law Society Gazette for innovation and reliability in funding.
- Transparent, real-time reporting: You always know the status and strategic implications of your dispute and funding.
If you need support weighing your funding and fee options, or want urgent contract analysis, our expert litigation funding lawyers are on hand for swift, confidential advice.
Frequently Asked Questions
Can my application for litigation funding be declined? What are the common reasons?
Yes. Applications are often turned down for weak case merits, inadequate value (usually less than £250,000), poor evidence, or if there is little prospect of recovering damages from the defendant.
Can I switch funding models if my case changes?
Switching is possible—such as moving from self-funding to a CFA or third party funding—but this affects terms and may require brokerage or funder approval. Get legal advice before making changes.
Who controls litigation strategy in a funded case?
Usually, you and your solicitor control the case. Funders may require input or have veto rights on key decisions like settlement. Scrutinise control clauses before signing.
What is the minimum claim value to qualify for funding?
Most funders set their threshold between £250,000 and £500,000, due to the administrative and risk costs involved.
Can I use litigation funding for a group action?
Yes. Collective or group actions are popular with funders, provided they are well-organised and the total value justifies the investment.
Are there up-front fees for applying for funding?
Reputable funders rarely charge application fees, but you may incur costs preparing your case and for legal advice. Confirm application costs in writing before you proceed.
What happens if the defendant cannot pay after I win?
If the defendant is insolvent or flees, you and the funder may be unable to recover damages. Funders look carefully at enforcement prospects before investing.
Can I negotiate the funder’s share of damages?
Absolutely. A strong, well-documented claim gives you leverage. Our lawyers negotiate routinely to secure the best terms for clients.
Do all solicitors offer the same funding expertise?
Most solicitors are not funding specialists or lack access to leading funders and contract terms. Our litigation experts use leading industry contacts and experience to secure the best outcome for clients.
If you have additional questions or want a confidential, obligation-free funding review, contact our experienced litigation funding solicitors for a rapid eligibility check.
Secure Strategic Litigation Funding Advice Today
Effective litigation funding opens the door to justice—removing financial risk and empowering claimants to press valid claims, no matter their resources. Understanding your funding options, from third party arrangements to CFAs and DBAs, will allow you to present the best possible case and pursue substantial commercial claims with confidence. Delaying key funding decisions, or entering into agreements without legal advice, risks missed deadlines and lost opportunities.
If you would like to discuss your funding eligibility, compare alternative arrangements, or require comprehensive contract review, call our experienced funding solicitors on 0207 459 4037 or use our online form for a Free Consultation.
