Emerging Worldwide Trends in Litigation Funding
All over the world, litigation finance is growing rapidly, and such growth brings increasing sophistication. For many years, funders typically invested in one case at a time, with each investment being independent of others. Now funders are investing in a range of cases from a single law firm or a single business enterprise. This is making litigation finance more of an instrument for risk management than a one-off response to a crisis.
Funders from many different companies all report that the market for litigation finance is moving away from single-case funding. To a certain degree, this trend is the product of an increase in the number of companies offering funding. As more companies compete to provide financing, market forces are driving fees down, and funders are looking for ways to decrease their own risk so that it can make economic sense for them to charge lower fees. When funders invest in a portfolio of cases, they can diminish their risk of losing their investment and can therefore charge lower rates.
Corporate clients often have large portfolios of litigation, and funders are working more often with such clients. This brings risk management benefits to both the funders and the corporations. As noted above, the funders can charge lower fees when they have a chance at recovery in a range of cases. The corporations can also be more aggressive in pursuing their own claims when they do not have to bear the litigation costs alone.
The increasing number of corporations seeking litigation finance means that there has been an increase in the amount of investment in antitrust litigation in the United States, the United Kingdom, and across Europe. Antitrust cases can be a particularly risky proposition for corporations because they are complex, involving many experts and extensive evidence, and they tend to last for years. Many of these case involve multiple jurisdictions, which adds an additional layer of complexity. This makes them a perfect opportunity for litigation finance.
The growth of litigation finance is also improving the understanding of the true nature of the litigation finance business. As corporations realize how litigation finance can be an effective instrument for spreading and diminishing their own risk, they realize that funders are involved in the same kind of effort to manage risk. This helps diminish the idea that funders are profiteers who exploit litigants; and it helps spread the truth about litigation finance: that it is an invaluable financial instrument that uses capital to promote better results and fewer losses in litigation.
Topics: litigation finance, legal reform, third-party funding, litigation costs, commercial litigation, portfolio financing
Works Cited: Natasha Bernal, The Latest Global Trends in Third-Party Litigation Funding, The Lawyer (July 11, 2017) available at https://www.thelawyer.com/global-litigation-funding-trends-2017/
