Scotland - Country Report - Handbook on Third-Party Funding in International Arbitration- Second Edition

On the whole, the use of TPF is growing across Scotland. It is commonly sought across many different types of actions such as commercial claims, insolvency, personal injury, family law, negligence actions and since their introduction in 2020, group proceedings.

Claim companies have operated in Scotland since the late 1980s. Claim companies are commonly owned by or connected with law firms, as historically solicitors were not permitted to take a percentage of the amount recovered as a fee, and so did not offer this service directly. However, legislation to allow this has been introduced and is tentatively being explored across the country.

In addition, there are pure TPF companies based in Scotland, one of which has been active in the sector for over 10 years.

It is no doubt still a small and evolving market, but there are options available for the cases which require funding. This can include cases for impecunious claimants, insolvency practitioners who simply have no funds available to raise actions, and inhouse counsel, whose annual budget did not anticipate the arrival of a large litigation.

One of the most significant elements of the Civil Litigation (Expenses and Group Proceedings) (Scotland) Act 2018 (“the 2018 Act”) is the introduction of Damages Based Agreements (DBAs) that can be used and enforced by Scottish Solicitors for the first time. DBAs are in essence “no win – no fee” agreements whereby a solicitor and client have an arrangement in which legal fees are calculated at an agreed percentage of the damages awarded in a successful action – if the client loses the action, they pay their solicitor either a pre-agreed lower sum or nothing at all.