A Quick History of Litigation Finance
Litigation finance originated in Australia during the mid-1990s after the enactment of legislation that permitted insolvency practitioners to enter into contracts to finance litigation characterized as company property. Following this, litigation funding companies began to show up to service to this new market.
Additionally, litigation financing ultimately was jump started by the legalization of class action law-suits in Australia. Then, as more time passed, the Australian High Court outright held that litigation finance arrangements were not an abuse of process or contrary to public policy.
Simultaneously as the litigation finance industry was taking off in Australia, so was the industry in the United Kingdom. However, unlike in Australia, the United Kingdom’s path to litigation financing began with the passage of two pieces of legislation. The first was the Criminal Law Act of 1967, which decriminalized maintenance and champerty. The second was the passage of the Courts and Legal services Act, that made it legal for conditional fee agreements to take place.
Eventually, litigation finance then made it to The United States. However, before the mid-2000s, the litigation finance industry in the United States was limited only to cases that involved personal injury. Then, around 2006, when Credit Suisse Securities founded a litigation risk strategies unit, specialized commercial litigation began. Currently, the commercial litigation finance market has expanded greatly and is now used in the United States by companies and law firms alike as a way to raise capital and eliminate risk from their balance sheets.
Litigation finance has largely been left for the states to decide its legality. The trend has continued towards the normalization of the use of litigation finance. Further, courts have even recognized protection from disclosure for communications between funders and litigants, and their counsel.
Keywords: Litigation finance, history, personal injury, United Kingdom, Australia, United States
Work Cited: Lake Whillans, The History and Evolution of Litigation Finance, Above the Law (January 27, 2017)
