While many companies have yet to discover the benefits of “off balance sheet” litigation funding arrangements, others are beginning to embrace them, particularly in jurisdictions such as the United Kingdom where cost-shifting occurs between the parties. General counsel have long sought the objective of knowing “what you are in for” in dispute work, but hitherto they have not often successfully achieved it. The lack of predictability in keeping to a budget in litigation or arbitration can be attributed to a number of factors, including:
- The fact that the client retains control or certainty over how the case is run including how many issues are pleaded and the way in which they are pleaded, which applications or motions to pursue and how to respond to those which the client is opposing
- The extent and volume of the documentary evidence (electronic or otherwise) that needs to be reviewed
- The number of witness interviews, witness statements, depositions and witnesses that need to be called at trial
- Defendants (there can be many in a complex case) naturally have their own strategies, one of which is often to make claimants spend lots of time and money on a case in the hope that they will quit, or to soften up the claimant for settlement discussions. An estimated cost for such counter-strategies can be factored in, but ultimately it’s a “guesstimate” and can increase the cost of the funding unnecessarily.
It’s difficult to accurately predict many of these factors at the outset of the case which is when funding arrangements are usually negotiated.
Once the client, funder(s) and insurer(s) have agreed on the terms of their arrangements in principle, they must coordinate with one another as well as with the retainer arrangements with the principal law firm, any other external counsel such as barristers and possibly foreign lawyers.
Experience has shown that funding arrangements are most successful when proper thought has been given not only to funding the case fully and with adequate contingencies for the whole life of the case, but that all organizations involved are happy with the deals they have struck, given that the case may last several years or more.