Contingency fee vs Litigation funding
With a contingency fee your own lawyer works without being paid unless you recover. With litigation funding a separate company pays the legal costs, and often the risk of the other side's costs, in return for a share of the recovery. Funders usually look for larger claims.
- Who carries the cost of the case
- Contingency fee: Your lawyer, by working unpaid until the end. Litigation funding: A third-party funder, who pays the lawyers as the case goes.
- What they take if you win
- Contingency fee: An agreed percentage of the recovery. Litigation funding: A multiple of the money invested or a percentage of the recovery, whichever the contract says.
- If you lose
- Contingency fee: No lawyer fee; expenses and the other side's costs may still apply. Litigation funding: Nothing to the funder (non-recourse); many funders also cover the other side's costs.
- Typical claim size
- Contingency fee: From small to large claims. Litigation funding: Usually larger claims; funders often want damages of around ten times the expected costs.
- Where it is allowed
- Contingency fee: Widely in the US, Canada and others; restricted in many European countries. Litigation funding: Most major jurisdictions, with rules that differ by country.
Frequently asked questions
Can I use a contingency fee and litigation funding together?
Sometimes. A funder may pay part of the costs while the law firm takes a reduced fee plus a success element. The total taken from your recovery should be set out in writing before you sign.
Do I have to repay a litigation funder if I lose?
Normally not: most funding is non-recourse, so the funder loses its investment. Check the agreement for exceptions such as misconduct or abandoning the case.
Which leaves me more money if I win?
It depends on the percentages, the length of the case and the multiple the funder charges. Ask for a worked example at several outcomes and timelines.