England and Wales - Part II Country Report - Handbook on Third-Party Funding in International Arbitration
Originally from Handbook on Third-Party Funding in International Arbitration
1.1.1. Is TPF commonly used in your Jurisdiction? If yes, since when (is it a new trend or a well-established practice)?
The use of TPF is widely understood and accepted in England and Wales but perhaps still not commonly used across the whole legal industry, as the pricing structures and demands on merits mean the majority of applications for funding are rejected. Those which are accepted tend to be at the upper end of the commercial litigation and arbitration market. Nevertheless, the industry has grown steadily in the last decade and both demand and supply are increasing. The Jackson reforms relating to civil litigation that came into force on 1 April 2013 endorsed TPF as a means of promoting access to justice.
1.1.2. Please shortly describe the TPF market in your Jurisdiction.
a) Is it dominated by local or international Funders, which type of Funders are active, which cases get typically funded?
There are a great many Funders operating in the English market, both local (albeit with the funds themselves held offshore) and international. The range of funders and the type of products they offer are easily viewed in the English Law Society’s regular publication, “Litigation Funding”, although this will not capture all of the activity in the market. There is no minimum funding amount, but most mainstream funders do not consider funding claims with costs less than approximately £1m. However, the market is adapting, and there are various funders and/or new products available for cases with costs in six figures. Many funders will also offer seed funding for case due diligence, or disbursements funding, including funding of court issue fees.
The crucial criterion is the economics of the case: will the likely win amounts be high enough to meet the funder’s, lawyer’s, insurer’s and client’s needs? Funders will typically expect to see a ratio of costs: damages at 1:10.
The cost of funding is dependent on numerous factors and will vary hugely, but as a very rough rule of thumb, funders will expect to see, in addition to a reimbursement of the investment, a return of at least 25-35% of damages or 3 x the investment, or whichever is the greater. It may be possible to negotiate better rates or staged returns for shorter investments, cases with excellent prospects, or where settlement is likely.