Global firm Eversheds Sutherland has launched ‘Total Dispute Finance’ (TDF) – a promise to embrace alternative forms of funding litigation – in a push that it says has already attracted high-value work from competitors.
One of the novel aspects of the offer is damages insurance which helps companies preserve their balance sheets.
TDF has been put together by Glenn Newberry, Eversheds’ head of costs and litigation funding, and Manchester senior partner Michael Clavell-Bate, with support from global co-head of litigation Paul Worth.
Mr Newberry said the idea was sparked three years ago by a third-party funder offering Eversheds money to spend on cases; while it was rejected, the firm realised that “unless we started talking to clients about funding options, someone else will”.
He and Mr Clavell-Bate spent a year meeting clients, funders, brokers and insurers to develop the offer, and have established panels of litigation funders and after-the-event (ATE) insurers to support cases.
He said: “We’re getting to the stage where all big commercial claims will have an element of risk-sharing with the lawyers.”
Mr Newberry, who has been running training for partners in every office, said the traditional response to client concerns about the cost of litigation was simply to offer a discount on hourly rates.
The new approach meant that Eversheds could actually offer a larger discount, combined with a full conditional fee agreement (CFA) with success fee, and then take out insurance for some of its contingent work in progress (WIP) – ending up with more than had it simply offered a smaller discount.
He talked about one case where a privately paying client with a strong claim ran out of money and was moved onto a CFA. The firm took out WIP insurance with a deferred premium: if the case won, the premium would be paid out of the success fee and, if not, the WIP would be paid by the insurance.
Eversheds will also work under a damages-based agreement (DBA), which is still a rare event in the litigation world – it is currently running a £4m professional negligence case under a DBA where it will bill around £700,000. “We will recover more under a DBA,” he said.
One of the cases TDF has attracted is a £110m Eastern European arbitration matter “from a magic circle firm that wasn’t prepared to look at alternative funding”, he said.
Two other large cases brought in concerned the enforcement of an $87m court judgment and $112m arbitration ruling.
Though Mr Newberry acknowledged that smaller, more niche, litigation practices already offered flexible funding models – while Pinsent Masons recently secured a deal with third-party funder Augusta – he said: “Even our most sophisticated clients, with panels of firms, say nobody else is talking to them like this.”
The damages insurance – whose provider Mr Newberry declined to name – could be used where the lawyers believed a claim was overvalued.
For example, if they thought a £200m claim was actually worth £20m, the insurer may require the client to cover the first £30m of any damages and then insure the rest at a premium of 10%. This would make the company’s maximum liability £47m, removing £153m from its balance sheet.
Eversheds was also looking to use funding to target enforcement work, with Mr Newberry saying a large number of banks have “considerable amounts of distressed debt and assets hidden globally – the idea of unlocking and chasing that debt without risk is very attractive”.