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

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