Litigation funding allows people and organisations to pursue legal action without paying all the costs upfront. Although it is often viewed as a simple financial arrangement, several lesser-known features can influence how a case is run and how any outcome is shared.
Litigation Funding Isn’t Only for People Short of Money
Litigation funding is no longer limited to claimants who cannot afford to bring a case. Many well-resourced companies now use it to reduce financial risk and keep their own capital free for other priorities. Specialist teams like //www.novo-modo.co.uk/litigation-funding provide UK litigation funding services.
Damages-Based Agreements Work Differently
A damages-based agreement allows a law firm to take a percentage of any compensation won, up to a set limit. This percentage must cover the firm’s fees, counsel costs and VAT. Because payment depends entirely on success, DBAs follow strict rules to remain valid.
Insurance Helps Manage Potential Costs
Claimants often take out After the Event insurance to protect against paying the other side’s legal costs if the case fails. The National Accident Helpline has a guide on what ATE insurance covers. Part of the premium is usually paid at the start, with the rest due only if the claim succeeds.
Proceeds Must Be Shared According to a Clear Agreement
If a case is successful, funders, insurers and legal teams may all be entitled to payment. A “waterfall” agreement sets out the order in which each party is paid, preventing confusion later.
Litigation funding involves more detail than many people realise, and understanding these facts can help claimants make informed choices.