Your legal fees paid by a third party


Third Party Funding is a term that covers a number of different types of financing arrangements. All of the arrangements, however, essentially involve a third party funder providing finance of some sort in return for a share of the proceeds of a case or a return on the capital it has deployed. The funder would typically pay the party's legal fees, although there is a high degree of flexibility when negotiating the level of financing and return.

Historically, there were limits on litigation financing for fear of falling foul of the laws of maintenance and champerty. These ancient laws prevented third parties from facilitating litigation in return for a share of the proceeds. Until the mid-20th Century, champerty and maintenance with both torts and criminal offences.

In recent years, Courts have acknowledged that the availability of litigation financing is an important aspect of access to justice. The result is that the doctrines of maintenance and champerty have been slowly attenuated. Litigation financing is now a core part of the English legal system with an estimated £1bn of financing available in the UK market. Although the world has moved on, it is still possible for an agreement to be champertous. You should therefore always consider taking legal advice before entering into a funding arrangement.

The paradigm example of litigation financing is a party having its legal fees paid by a funder with some or all of the disbursements paid by the party itself. In return for this, the funder would be paid a multiple of its investment or a percentage of recovery, whichever is higher.  

We work with a wide range of funders across the litigation financing market. The Association of Litigation Funders (ALF) was formed in 2011 and currently has nine members. There are also many non-member funders in the market. The benefit of exploring funding with an ALF member is that these funders adhere to a voluntary code of conduct and have a formal complaints process. All ALF members' funding agreements are also reviewed and approved by an independent barrister to ensure compliance with the code. There are however reasons why you might wish to explore funding from a non-ALF member.

At Addleshaw Goddard, we have significant experience negotiating funding agreements with and have close relationships with funders from across the market.