5 minutes on… adverse costs and ATE insurance

High-stakes commercial litigation and arbitration are inherently costly, but in cost-shifting jurisdictions—such as England, Australia, Hong Kong and Singapore—claimants face the additional risk of liability for their opponents’ costs if they lose. Beyond the hundreds of millions at stake in technically and evidentially complex matters, claimants who lose may pay adverse costs—potentially millions of dollars in fees and expenses incurred by respondents in defending their claims.

While ATE insurance for high-cost, high-stakes matters is understandably desirable given the significant sums at stake, most ATE products have been limited to smaller matters with a low risk profile or else claimants have been required to make separate applications for adverse costs coverage and litigation funding—resulting in a longer and more burdensome process. Burford is the only legal finance provider to offer ATE insurance to clients involved in high-risk, high-value disputes where Burford is also providing funding. 

How adverse costs work

In cost-shifting jurisdictions, a judge decides whether and what the loser must pay based on the merits of the claim. A meritorious claim lost on a technicality, for example, may result in no adverse costs to the loser, whereas a frivolous claim may lead to high indemnity costs. Due to the burden of downside risk, adverse costs jurisdictions tend to be less litigious, and companies with meritorious claims may forgo affirmative litigation—leaving millions on the table.

How ATE insurance helps

After-the-event (ATE) insurance protects against the downside risk of having to pay an adverse costs order if the policyholder loses its claim. The premium for these policies is either payable upfront or, in the event of a successful resolution, the premium is paid from sums recovered in the case.

A package deal: ATE insurance and legal finance  

Recognizing the disconnect between ATE insurance and large, risky commercial disputes, Burford launched Burford Worldwide Insurance (BWIL) to address the demand for adverse costs protection among large corporations. With BWIL, Burford is able to offer companies the complete package: Financing for the costs of pursuing the dispute, and insurance policies that protect against the risk of potential tens of millions in adverse costs for litigation and arbitration matters. No other legal financier in the world is able to provide an in-house comprehensive solution to legal risk and costs. 

With litigation finance and ATE insurance:

• Up to 100% of legal costs are covered
• Claimants with high-risk, high-value claims undergo only one diligence process
• Claimants have upside participation in the outcome if the claim is successful
• Downside exposure is mitigated, and the insurance policy is paid for by the legal finance provider who answers to any adverse costs liability if the claim is unsuccessful
• Claimants have the opportunity to monetize legal assets, gaining access to capital that can be used flexibly for business purposes

Founded during the last recession, Burford is keenly aware of the problems that may arise from an economic downturn. Burford is equipped to provide companies with cash and certainty during a time when they need it most. And while we are able to offer solutions for the now, our track record and capital availability demonstrate that we’re here for our clients for the long term.