8 February 2013Print This Post

Psst – heard about third-party funding?

Carron: funding now in the legal mainstream

Most lawyers claim that they tell their clients about third-party litigation funding – but if they are, they must be speaking very quietly as few in-house counsel say they do, according to new research.

The survey, commissioned by Harbour Litigation Funding, found that while 80% of law firms and 50% of chambers say they discuss funding with clients, not one of the 31 in-house counsel polled recalled having such a conversation.

One possible reason is that lawyers put it in the paperwork without actually discussing it; some lawyers may also have answered the question the way they knew they should.

Nearly 60% of the 37 law firms surveyed said they discussed conditional fee agreements (CFAs) with clients, and 18% of in-house lawyers said that had happened – but none had been told about after-the-event (ATE) insurance.

Nonetheless, a fifth of in-house lawyers were aware of litigation funding, the same figure as knew about ATE, while 39% recognised CFAs as an option. Looking to April, none were aware of damages-based agreements.

In-house lawyers cited cost/cash flow control and risk minimisation as the main benefits of funding. The key barriers to seeking it were a loss of control over the litigation and the option of self-funding; private practice lawyers, by contrast, saw the cost of funding and investment required to set it up as the principal barriers.

In-house counsel said low chances of success and costs outweighing the benefits were the main reasons they abandoned litigation.

Harbour CEO Brett Carron argued that the findings showed that third-party funding has “moved to the legal mainstream as far as solicitors and barristers are concerned”.

Susan Dunn, Harbour’s head of funding, added: “It’s clear that solicitors, barristers and clerks are talking about litigation funding at the right stage of a case, which is tremendously encouraging, and yet there is more work still to be done to educate in-house counsel and dispel certain myths which develop from a lack of understanding.”

The survey, conducted by Acritas, also included 33 barristers’ chambers. The in-house lawyers’ companies ranged in turnover from £41m to £26bn.

By Neil Rose

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