Glossary
Litigation Finance and Funding Glossary
Plain-English definitions of the key terms used in litigation funding and legal finance.
Litigation finance has its own vocabulary. This glossary explains the terms claimants, law firms, funders and investors meet most often — from non-recourse funding and the recovery waterfall to ATE insurance and portfolio funding — in plain English. Where a term has a fuller guide on our site, the definition links to it.
Adverse costs
- The losing party's liability to pay a portion of the winning party's legal costs. In funded litigation this risk is often transferred using After-the-Event insurance.
After-the-Event (ATE) insurance
- An insurance policy taken out after a dispute has arisen that covers a claimant's exposure to adverse costs and, sometimes, own disbursements if the case is lost. Learn more.
Arbitration funding
- Litigation funding applied to arbitration claims, including international and investor-state arbitration, where a funder covers costs in exchange for a share of any award. Learn more.
Capital protection insurance
- Insurance that reimburses a funder or investor for some of its deployed capital if a case fails. It manages downside risk but does not guarantee a return or remove risk. Learn more.
Champerty and maintenance
- Old common-law doctrines that once made it unlawful to support someone else's litigation (maintenance) or to do so for a share of the proceeds (champerty). Largely abolished in England and Wales, they are the historical reason litigation funding was once forbidden. Learn more.
Claimant
- The party bringing a legal claim. In funded litigation the claimant receives non-recourse capital and shares any recovery with the funder.
Collective / group action
- A claim brought by, or on behalf of, a group of claimants with a common grievance. Its scale and cost profile often make funding necessary. Learn more.
Commercial litigation funding
- Third-party funding of business disputes — contract, competition, fraud, insolvency and similar — where the claim has commercial value and merit. Learn more.
Conditional Fee Agreement (CFA)
- A 'no win, no fee' arrangement between a client and their lawyer. The lawyer is paid (often with a success fee) only if the case succeeds. Distinct from third-party funding. Learn more.
Cross-collateralisation
- In portfolio funding, the feature by which recoveries from any case in the pool can repay capital deployed across the whole portfolio, within agreed limits. Learn more.
Damages-Based Agreement (DBA)
- An arrangement where a lawyer's fee is calculated as a percentage of the damages recovered. Like a CFA, it is a fee arrangement rather than external funding. Learn more.
Data room
- A secure repository of case documents — pleadings, evidence, counsel's opinion, budgets — that a funder reviews during due diligence. Learn more.
Due diligence
- The funder's assessment of a case before committing capital, covering legal merits, quantum, defendant solvency, enforceability, budget and the legal team. Learn more.
Enforcement risk
- The risk that a successful claimant cannot actually collect its award because the defendant lacks assets or those assets are hard to reach. Winning is not the same as being paid. Learn more.
Funder
- The party that provides capital to pursue a claim in exchange for a share of any recovery. Funders bear the loss if the case fails.
Litigation Funding Agreement (LFA)
- The contract between funder and claimant setting out how much capital is provided, how the funder is repaid, the recovery waterfall and each party's rights and obligations. Learn more.
Litigation loan
- Money borrowed to pay for a legal case, usually on a recourse basis — it must be repaid with interest whether or not the case succeeds. Different from non-recourse litigation funding, where nothing is owed if the case fails. Learn more.
Non-recourse funding
- Funding repaid only from the proceeds of a successful case. If the case fails, the claimant owes the funder nothing. Note: for investors, deployed capital remains fully at risk.
Portfolio funding
- Capital advanced against a pool of cases rather than a single claim. Diversification across matters usually allows keener pricing than single-case funding. Learn more.
Quantum
- The amount of money a claim is worth if successful. Funders assess quantum against expected costs — the damages usually need to exceed costs by a wide margin.
Recovery waterfall
- The agreed order in which proceeds from a successful case are shared: typically deployed capital first, then the funder's return, then the balance to the claimant.
Return multiple
- A common way of pricing funding, expressed as a multiple of the capital the funder deploys (for example, capital returned plus an agreed multiple of it). Multiples are targets, not guarantees.
Single-case funding
- Non-recourse funding of one individual claim. Pricing reflects the binary risk of a single outcome and is usually higher than portfolio funding. Learn more.
Special Purpose Vehicle (SPV)
- A separate legal entity sometimes used to hold and finance one or more claims, ring-fencing the assets and liabilities of a funding structure.
Third-party litigation funding
- The financing of a legal claim by an independent party with no prior interest in the dispute, in exchange for a share of any recovery. Also called litigation finance or legal funding. Learn more.
Have a question about a term?
Audley Capital is a litigation finance adviser and arranger. Talk to our team about how funding could work for your case or portfolio. Capital is at risk and no outcome is guaranteed.
