Litigation finance
Litigation Funding
Third-party capital committed to a dispute on agreed terms, usually non-recourse.
Illustrative. A teaching shape, not pricing. Funding pays for the case and takes a share of the upside; insurance caps the downside for a premium. Many matters use both.
What is litigation funding?
Litigation funding is the provision of capital by a third party to pay the costs of pursuing a claim, typically on a non-recourse basis. The funder is repaid, with an agreed return, only from proceeds. Funding supplies capital; it does not by itself remove adverse costs or capital risk, which is where insurance is often added.
On this page2 min read
Key points
- Capital is supplied by a third party rather than the claimant.
- Return is agreed in advance and paid from proceeds.
- Non-recourse funding does not automatically cover adverse costs.
- Funding and insurance are complementary instruments, not substitutes.
In this section
- Litigation Funding in the UKHow funding works in England and Wales, costs, regulation and insurance.
- The PACCAR Decision and Litigation FundingWhat PACCAR decided, why it mattered, and where it leaves funding.
- Third-Party Litigation Funding ExplainedWhat it is, how it works in court and arbitration, and disclosure rules.
- Funding and InsuranceTypical combined structures and how to sequence them.
- Funding + ATEWhy funders require ATE and how cover is staged.
- Funding + Capital ProtectionProtecting the funder's own capital, case or portfolio.
- Funding vs InsuranceThe difference, the costs, and when each is the answer.
- Self-Funding vs FundingSelf-funding, funding, or self-funding with ATE compared.
How funding is structured
A funder pays some or all of the legal costs in exchange for a return if the case succeeds — commonly a multiple of capital deployed, a percentage of recoveries, or the greater of the two.
Funding is usually non-recourse: if the case fails, the funder loses its investment.
What funders assess
Much the same as underwriters: merits, quantum, budget, recoverability, the legal team and the claimant's commitment.
Funders also look at duration, since time erodes returns.
Where insurance is added
Funders often require the claimant to hold ATE so that adverse costs do not fall on the funder or the claimant.
Funders may also protect their own capital with capital protection insurance, lowering their risk and sometimes their price.
Costs of capital
Funding is expensive because it is non-recourse and long-dated.
The claimant gives up a share of the upside in return for removing cost and risk.
Alternatives
- Self-funding with ATE
- Law firm risk-sharing through conditional or damages-based fees
- Assigning the claim
- Monetising part of it
Frequently asked
What does a litigation funder charge?
Usually a multiple of the capital deployed, a percentage of recoveries, or the greater of the two, payable only if the case succeeds.
Do I have to repay a funder if I lose?
Usually not: litigation funding is typically non-recourse.
How does litigation funding work?
A funder pays some or all of the costs of a claim in exchange for a return from any recovery. If the claim fails, the funder usually loses its investment.
What claims do litigation funders take on?
Substantial commercial claims and arbitrations with strong merits, proportionate budgets and a solvent opponent.
Does a funder control my case?
Typically not; control stays with you and your lawyers, subject to reporting and consultation rights in the funding agreement.
General information only. This page is not legal, financial, investment or insurance advice. Any insurance is subject to underwriting and to the terms of the policy wording issued.