1. www.thejudge.co.uk UKELA London Meeting Substantial Environmental Disputes & Their Funding Matt Little & James Delaney 12 th July 2011

2. What is ATE? Legal Expenses Insurance (‘LEI’) Insurance taken out after the event giving rise to a legal dispute has occurred Policy of indemnity –Opponent’s costs (and potentially interlocutory costs orders) –Own disbursements (incl. Counsel’s fees) –Own solicitors’ fees (requires risk alignment) ATE is not… –Interim financing for own costs –Credit risk cover www.thejudge.co.uk

3. ATE Insurance Today Current market: Relatively stable Differing Capacities / ‘Footprints’ Security “Do I need to be acting on a CFA?” Indemnity parameters? www.thejudge.co.uk

4. Policy Structure Deferred until conclusion Contingent upon success / self-insured Stepped / Increasing / Discounted Cost increases with insurer’s financial risk Allows early settlement Recoverability Tactical considerations (Notice of Funding) How much? www.thejudge.co.uk

5. Issues to consider Searching the markets –Maximise the chances of securing terms –Recoverability –First mover advantage? –How much cover? (Too much v. ‘top up’) –Timing (Kris Motor Spares Ltd v Fox Williams LLP [2010] EWHC 1008 ) Defining “success” Claimant or Defendant? Multiple policyholders Unusual cases, non-monetary remedies etc www.thejudge.co.uk

6. Issues to consider (cont.) Partial Success Part 36 risk Multiple Opponents / Heads of Claim (Offsets?) Security for costs Al-Koronky and another v Time Life Entertainment Group Ltd and another [2006] EWCA Civ 1123 Michael Phillips Architects Limited v Riklin and another [2010] EWHC 834 (TCC) Premium recoverability –Currently recoverable in England & Wales subject to test of reasonableness - Access to Justice Act 1999 s.29 [ but Jackson LJ’s Recommendations] www.thejudge.co.uk

7. Example Case – Explosion at manufacturing plant. Toxic chemicals released causing various alleged claims by local businesses/citizens. Damages claim - £50m Legal Cost estimates: Adverse costs £5m Own Side Disbursements £2m Own Side Solicitors’ fees £3m Insurance cover (a): adverse + disbursements = £7m limit of indemnity Premium: 45% of insured sum = £3.15m. NB: Discounts up to 90% for early settlement Insurance cover (b): adverse + disbursements + 50% own fees = £8.5m LOI Premium: 45% of insured sum = £3.825m. Discounts up to 90% Premium only payable if case succeeds. Case loses no premium and insurer indemnifies costs. www.thejudge.co.uk

8. Litigation Buyout Insurance Key Features Covers damages and legal defence costs Caps Defendant’s liability at certain level Insured’s retained element of risk (retention / excess) Upfront premium (not ‘contingent’) Example: Defendant in case example facing £60m risk (£50m claim and £10m costs for both sides if lost) [‘Win’ = settling for less than £40m inclusive] LBO excess of £40m with premium of £1.5m Worst case outcome reduced from £60m to £40m (Insurer’s risk = £20m with £1.5m premium) www.thejudge.co.uk

9. Third Party Funding What is it? –Professional Funder with no prior interest in case –Share of proceeds Cost to the client –Multiple of amount invested or % of damages? or commonly a combination of both –Increasingly competitive – market adjustment occurring Ingredients? –Good prospects of success –Substantial (monetary?) value (not necessarily) –Financially stable Defendant www.thejudge.co.uk

10. The Future of ATE? MOJ’s Recommendations ATE insurance premiums no longer to be recovered from paying party Abolition of CFA success fees Consequences if implemented Greater focus on economics i.e. cost to claim value ratio Increased pressure to ‘shop around’ to ensure client is not over paying for funding/insurance www.thejudge.co.uk