For us, using litigation funding is primarily a tactical advantage. It creates an extra dynamic for the other side to consider.
Here’s an explanation of some of the language and terminology encountered in a litigation situation.
In many cases the losing party has to pay their own legal costs and those of the opponent/winning party. So each party has to consider how they will cover that potential expense.
Adverse costs or after the event insurance ('ATE')
This is insurance to cover the costs of losing a case, for which a premium is payable. Insurance does not, however, cover the ongoing own side costs of cases and is complementary to Litigation Funding.
A form of alternative dispute resolution, a method for the resolution of disputes outside court, where parties in a dispute refer it to one or more persons (the "arbitrators", "arbiters" or "arbitral tribunal"), by whose decision (the "award") they agree to be bound. A third party reviews the evidence in the case and decides what is legally binding for both sides. Commercial disputes often use Arbitration for resolution, particularly in the context of international commercial transactions. Harbour is currently funding International Arbitration cases governed by a wide range of different rules, from ICSID (otherwise known as Bi-lateral Investment Treaty (or ‘BIT’) cases) through to ICC and LCIA cases.
Arkin v Borchard Lines Ltd & Others (2005)
This was an important case in the English Court of Appeal that, amongst other things, made clear that Litigation Funding is a legitimate method of financing litigation.
Association of Litigation Funders (ALF)
The membership association for all litigation funders launched in November 2011. Harbour is the founder member of ALF and its Code of Conduct. http://associationoflitigationfunders.com/
Before the Event insurance
Certain household or car insurance policies include coverage for legal costs for individuals. Typically they state which lawyer the claimant should use in the event of a claim and they cover own side costs to a fixed amount. This insurance is generally not available in commercial disputes.
Champerty and maintenance
These are ancient legal principles which state that a funder of a case cannot control how the claimant runs their case. There are still some who think that this means funding is not permitted. Champerty and maintenance do not restrict Litigation Funding, which is supported by case law and in public policy statements. See Arkin, the Civil Justice Council and Chapter 11 of The Jackson Report.
Civil Justice Council ('CJC')
An Advisory Public Body established under the Civil Procedure Act 1997 with responsibility for overseeing and coordinating the modernisation of the civil justice system. It provides advice to the Secretary of State for Constitutional Affairs on the effectiveness of aspects of the civil justice system, and makes recommendations to test, review or conduct research into specific areas. www.civiljusticecouncil.gov.uk
In 2007 the CJC published a report recommending the acceptance of third party funding. http://www.civiljusticecouncil.gov.uk/files/future_funding_litigation_paper_v117_final.pdf
Civil litigation is a legal dispute between two or more parties that seek money damages or specific performance rather than criminal sanctions. A lawyer who specializes in civil litigation is known as a “litigator” or “trial lawyer.” Lawyers who practice civil litigation represent parties in trials, hearings, arbitrations and mediations before administrative agencies, foreign tribunals and federal, state and local courts.
Any party bringing a claim or claims in litigation, arbitration or tribunal. Harbour does not currently fund defendants to cases unless they have a good counterclaim.
Conditional Fee Agreement ('CFA')
This is an agreement, predominantly used in UK litigation, whereby a lawyer agrees to discount his/herfees in return for a success fee if the case is successful and monies are recovered. The success fee is determined by both the level of risk involved in the case and the amount of discount offered. Expert witnesses may not operate on a conditional fee basis and must be paid in full.
This is a different type of success fee where the lawyer charges no fee throughout the life of the case but takes a percentage of the damages awarded to the claimant when the case succeeds. Like the 100% CFA, the lawyer working on a contingency fee recovers nothing if the case is not successful. Contingency fees are permitted in various jurisdictions. In the UK, contingency fees are now – since 1 April 2013 – permitted in all commercial litigation and the arrangement is known as a Damages-Based Agreement.
Damages-Based Agreement or DBA
See “Contingency Fees”.
Deed of Indemnity
This is something which sits alongside ATE as a guarantee to pay the opposing party if the case is unsuccessful. It carries with it an additional cost to the cost of the ATE premium.
Loss of opportunity claims
A claim where damages are based on speculative future losses. The claimant claims that the defendant’s actions prevented him/her from making a profit or otherwise gaining an opportunity. The value of these claims is often uncertain.
Security for costs
In certain jurisdictions a defendant is entitled to apply for security for his/her legal costs where he/she can show a corporate claimant has insufficient assets to satisfy a costs payment if the case is unsuccessful, or in the case of an individual claimant, that the individual is not resident in the jurisdiction of the legal proceedings.
In each case the court examines the adequacy of the proposed security