As litigation finance has grown and expanded into many areas of the law, the energy sector has become a natural fit for the use of litigation finance. This is in part because in the energy business there are a multitude of unknowns from price fluctuations to high infrastructure coasts, from the risk of dry wells to the complexities of international deals with multiple partners. Therefore, a way to reduce risks, as litigation finance does, is great for an industry with more uncertainty than other industries.
Additionally, the industry is very complex, often requiring expensive infrastructure and risky, time-consuming extraction and distribution activities. As well as regulation, permissions, and rights, there is a lot to create disputes between partners, distributors, or even nation-states.
This is where litigation finance can help provide capital for commercial litigation and arbitration, allowing the energy companies to continue to focus on meeting other business needs. The traditional way to providing assistance would be through a single claim. In this scenario capital is provided to the litigant or the law firm to pay some or all of one dispute’s costs. This type of funding can be beneficial for smaller energy companies that simply do not have an extensive budget for litigation or for large, publicly traded companies that do not want the negative accounting impact that comes with including spending for litigation on the companies balance sheets.
But that is no longer the only option, now there are also litigation finance options in the form of portfolio transaction structures to sustain two or more cases. Just as the single case option is tailore
Whether in the form of single case financing or portfolio transaction structures, anything that increases predictability and shifts risk in the energy sector adds value for the company. This is why there has been an increase of energy companies using litigation finance not just in the United States but also internationally.
Topics: litigation finance, alternative litigation finance, third-party funding, energy sector
Works Cited: Emily Slater, How Legal Finance Helps The Energy Sector Access Capital, Law360 (January 25, 2018)