Litigating in a downturn

Many commercial lawyers in the UK, previously reluctant to enter into such arrangements, are now much more likely to enter into conditional fee agreements (CFA) backed up by after the event (ATE) insurance to litigate cases on behalf of clients, according to a recent survey by legal expenses company, First Assist Legal Protection. ATE insurance covers clients against the costs of losing a case. More than three quarters of the commercial litigators questioned by First Assist expected their case loads to increase as a result of the economic downturn. First Assist managing director, Peter Smith, said that in the downturn companies are more likely to need to litigate but are less likely to have the financial resources to bring legal action and so will turn to conditional fee arrangements and after the event insurance. However, until recently many commercial litigators have been reluctant to use CFAs and ATE insurance. Their main concerns were whether policies would cover all the eventualities encountered in cases and whether the ATE premium would be fully recoverable from the losing side if the claim is successful. Respondents also expressed fears that, in the event of a protracted case, extending the amount of cover will either be unachievable or prohibitively expensive. But Mr Smith said that the ATE insurance market had moved on and was now much more effectively addressing the needs of clients. He said that the combination of CFAs and ATEs allowed companies to bring cost free, risk free litigation. “If they lose, they don’t pay a premium and we pick up their liability for their own disbursements and their opponents’ costs. If the claim is successful, then the ATE premium, their lawyers’ fees and other costs are paid for by the other side.”