Counsel fees are only part of the burn. Funders who model "external only" miss internal line items that decide whether Tranche 2 is viable — and claimants who load ordinary opex into litigation budgets distort underwriting in the other direction. This article defines what belongs in the internal layer of the cost stack, how to allocate it, and what funders exclude.
Keywords: internal legal costs, litigation budget, war room, data room cost, funder burn
Belongs in the budget model
- In-house legal & compliance time — hourly or FTE allocation; incremental hours only
- Project management — war room, tasking, vendor orchestration, status reporting
- Data room & IT — hosting, OCR, access control, forensic images, chain of custody
- Translation & local counsel coordination — especially cross-border — tie to UK/CH bundles
- Board & executive review — often underestimated in group claims and regulated entities
- Internal investigations — witness prep support, HR coordination on employee witnesses
Allocation methods funders accept
| Method | When used |
|---|---|
| Hourly capture | Small matters, clear timekeeping |
| FTE slice | Group claims with dedicated team |
| Lump sum phase budget | War room months 1–6 with cap |
| Vendor pass-through | Data room invoices with markup disclosed |
What we exclude from "internal"
Ordinary business operations unrelated to the dispute should not load the litigation budget — unless incremental because of the case. Examples to exclude: routine sales travel, unrelated product R&D, generic IT maintenance not tied to discovery. When in doubt, ask: would this cost exist if the lawsuit disappeared tomorrow?
Interaction with document review
Internal PM often orchestrates external review vendors — double-counting happens when PM fees sit in both counsel invoice and internal bucket. Funders want a single owner line per function in monthly burn reports.
FAQ
Are internal costs recoverable? Jurisdiction-dependent — budget separately from recoverability assumptions.
Data room vs discovery hosting? Often split internal/external — disclose mapping.
AI screening fee? External screening ($50) ≠ internal PM — different bucket.
Anonymous vignette
Group claim: internal legal allocated 0.4 FTE for 18 months (€180k loaded), PM contractor €90k, data room €45k — €315k internal layer. External counsel €1.1M. Funder model that omitted internal layer showed false 22% underburn at month 12 when Tranche 2 was requested.
Burn report line mapping
Recommend separate GL codes: LEG-INT-PM, LEG-INT-DR, LEG-INT-GC, LEG-EXT-COUNSEL. Funders reconcile monthly CSV to model assumptions.
War room economics
War rooms run €15k–€40k/month fully loaded (space, PM, IT support, counsel coordination) on mid-size commercial matters. Six-month war room = €90k–€240k internal layer before external review spikes. Funders cap war-room months in covenants when burn reports show diminishing returns.
Data room total cost of ownership
Setup €10k–€30k, monthly hosting €2k–€8k, exit/migration €5k–€15k. OCR and translation surge costs during ingest. Compare duplicate review waste in seven spends when data room reorg triggers re-review.
Extended FAQ
Cap internal at % of external? Some funders use 25–35% rule-of-thumb — matter-specific.
Employee witness time? Incremental HR/legal coordination belongs internal.
Board and regulated entity costs
Listed companies and regulated firms incur board minutes, disclosure committee, and regulatory notification work incremental to litigation. Budget €25k–€80k annually on long matters — often missing from "counsel only" claimant spreadsheets.
Glossary
- War room — dedicated matter coordination
- FTE slice — fraction of employee time
- Incremental — cost exists only because of case
Related reading on this site
Continue with linked pillars in this article and the blog index. Machine-readable catalogue: llms.txt. Cost stress-test: burn calculator. Live screening: agents section. Questions: [email protected]. All content educational — engage qualified counsel for your matter.
Related: cost stack, review curve, useless spends.