Third-party funding is proving popular, although excessive costs are still seen as a barrier. Richard Lloyd reports

The air cargo price-fixing litigation looks promising from a plaintiffs lawyer's perspective. Since US and European antitrust authorities raided the offices of more than a dozen airlines in February 2006, settlements and fines have been racking up.

The US Department of Justice has levied more than $1.6bn (£1bn) in fines against 15 airlines and air cargo companies. In 2006, Deutsche Lufthansa settled claims from a class of US plaintiffs for $85m (£54m). Class actions against other airlines are pending in the US and Australia.

Peter Koutsoukis, formerly a lawyer at the Australian plaintiffs firm Maurice Blackburn, would like a piece of the air cargo action in Europe. Not in his capacity as a lawyer, however. He's looking to invest. The company he leads, Claims Funding International (CFI), is a third-party litigation funder, now drawing up plans to back an air cargo suit in England and one other European jurisdiction.

In third-party funding, which is highly developed in Australia, the premise is simple. An investment fund pays all or part of the claimant's legal fees, then takes a share of the damages won, typically 10%-40%.

Third-party litigation funding in England and Wales was once confined largely to insolvency cases. However, as the English courts have sought to broaden access to the courts for all, funders have been allowed to back a broad spectrum of cases. The Civil Justice Council, which advises the British Lord Chancellor on civil law issues, has recommended that "properly regulated third-party funding should be recognised as an acceptable option for mainstream litigation."

Funds such as Harbour Litigation Funding, IM Litigation Funding, Juridica Investments, and Allianz Litigation Funding have all become major players in the nascent market. Brokers such as Calunius Capital LLP and Global Arbitration & Litigation Services specialise in putting cases and funders together. The funds are also attracting significant investment. In December 2007, Juridica raised £75m on London's junior stock market, and then in April 2009 did a second fundraising of £33.2m.

While smaller claimants have shown the most interest in such non-traditional fee schemes, some funders, such as Allianz's UK head of litigation funding, Christian Stuerwald, say that major corporations are looking at it more closely.

So far the uptake has been minimal. A 2008 survey by market research company Ipsos Mori and Addleshaw Goddard found that just 2% of large UK companies had experience with third-party funding for their litigation matters, with almost half saying they were very unlikely to use it in the future. Still, that doesn't mean that corporate clients can dismiss third-party funding altogether.

"It's not a major blip on our radar in the UK – except, of course, funding may encourage more speculative cases against us," says Richard Wiseman, a senior in-house lawyer at Royal Dutch Shell.

CFI, a relative newcomer in the market, started as a joint initiative in Europe by Maurice Blackburn and litigation funder IMF (Australia). IMF withdrew at the end of 2008, citing the risks of the UK market and the economic downturn, but CFI managing director Koutsoukis says that he is close to reaching agreements with new co-funders.

When it comes to backing cases, Koutsoukis is proceeding cautiously. He likes the air cargo case because the chances of success look fairly good, depending on the results of an ongoing investigation by the European Union's Competition Commission on the extent of the price-fixing cartel. Plus, the airline defendants have deep pockets. Currently, he's looking for plaintiffs among businesses that have to ship goods quickly, seeking to line up claimants with about £100m in total losses.

"The big negative for the UK is just that it is so expensive to bring the case," Koutsoukis says. The average billing rate is 40% above major jurisdictions in continental Europe, he says, and the English system of having solicitors prepare a case and barristers argue it in court means two sets of lawyers' fees. Plus, in England, the losing side pays the winner's costs. Koutsoukis estimates that the air cargo case in the UK will cost £10m in upfront fees, while in France