The future of commercial litigation funding post Jackson

The brave new world of litigation funding ushered in by the Jackson Reforms on 1 April 2013, has created great uncertainty over the funding of commercial disputes.

As a result, there is no doubt that before the event insurance will play a much more prominent role in litigation funding than previously, and all businesses would be well advised to undertake a proper risk assessment of their commercial operations as a matter of course to make sure that appropriate procedures are in place to manage that risk, including the availability of insurance.

In the absence of insurance, the option of the private retainer arrangement for payment of legal fees still remains. However those businesses that do not have the means to fund litigation on that basis will then have to consider the alternative funding arrangements that are now available.

The main point to note from the Jackson Reforms is that it is no longer possible to pass on the cost of alternative funding arrangements to the other side at the end of the litigation. Parties are now required to bear those costs themselves, whether under the revised form of Conditional Fee Agreements or the new contingency style Damages-Based Agreements introduced by the reforms. The effect will be to ultimately reduce the amount of damages that a party will receive if it is successful.

These new funding models have not yet been tested so it is not yet clear how they will work in practice but this uncertainty should not put businesses off seeking legal redress. Business owners still have a number of different options open to them. The main concern is to identify what is best for the client.

It is apparent even at this early stage that these arrangements have the potential to cause conflict between a party and its legal advisers, both during and at the end of a legal claim if the terms of the arrangement and the implications for the client have not been properly explained and agreed beforehand.

In our opinion it is therefore essential that the legal adviser undertakes a thorough review and assessment of all aspects of the case with the client at the outset. This will ensure the most appropriate funding option is identified to meet the client’s financial requirements and commercial objectives.

As with all business disputes we get involved with, our approach at Harrison Drury is precisely that. To sit down with the client at the beginning to determine exactly what their outcome objectives are, how the litigation is going to be funded, and what it is going to cost.

Only by doing this can we fully evaluate the merits and likely outcomes of a case and advise clients on the best course of action for pursuing, or defending, a commercial claim, including appropriate funding options.

We would therefore advise any business that is considering pursuing legal action to seek professional advice at an early stage so that they can make a fully informed decision before proceeding.

If you wish to know more about commercial litigation funding options, or any other commercial dispute matter, please contact me on 01772 258321 or Colin.Fenny@harrison-drury.com