Trending Now
Commercial Legal Innovation

Embracing Sustainability in Litigation Finance

September 19, 2023

Embracing Sustainability in Litigation Finance

Gian Marco Solas, Ph.D.2, is a qualified lawyer and academic, and currently serves as the Lead Expert at the BRICS Competition Law and Policy Centre and in private practice, where he advises on the application of physics models in (antitrust) litigation and market & investment modeling worldwide. With over a decade’s experience working with law firms and litigation funders, where he has inter alia built and managed the (then) largest European collective redress initiative (the Italian truck cartel initiative), Dr. Solas has published a number of papers on litigation funding and is the author of Third Party Funding: Law, Economics and Policy (Cambridge University Press, 2019) and the forthcoming ‘De Lege et Amore – Theory of Interrelation & Sustainability (Escargot, 2023) about the interrelation of the laws of physics and human laws in the economy. In his latest analysis about the litigation funding market, Dr. Solas looks at three previous historical litigation funding cycles that have similarly and quickly appeared and disappeared in specific spatio-temporal dimensions (Ancient Greece, Ancient Rome and Middle-Ages England), to then conclude – on the basis of recent and publicly available evidence – that the same ‘destiny’ appears to be repeating in the modern global cycle. This analysis on the one hand suggests to reject the non realistic view that litigation funding would be an uncorrelated asset class, which view ultimately is backfiring and making capital raises more difficult. While, on the other, to learn from its cyclicality and correlation to the economy to understand how and where to evolve. That is a fund individual choice that can be summed up, as matter of principle, to either transform into (or merge with) a proper asset manager (managing litigious and not litigious assets and / or classes thereof) or into a law firm (or special type thereof, with funds, technology, etc.) making profit both upfront and on a contingency / conditional or other basis. Such move would also potentially remove the need for discussions and implementation of sector-specific regulation of litigation funding while, from a more economic point of view, potentially allow to mitigate the risks physiologically linked to portfolios of unsecured debt in an economic downturn. In Dr. Solas’ view, it is therefore pivotal for the specialist litigation funding industry to embrace legal science and work on their “legal finance ‘beta’ strategy” to potentially move from the tail of the ending “debt cycle” to the head of the new “codified cycle”. This move should be designed to allow litigation funders to reach a realistic equilibrium between high-risk-high-reward investments with lower but steady and more secure income streams. Thus, freeing them from the evidently too tight and inefficient financial model that – together with regulatory pressure and other challenges – appear to be strangling the industry at this stage. In fact, many litigation funders are already part of larger and / or balanced conglomerates, while many others are not. All or most of them, however, seem to be still attached to the now surpassed view of a commoditized economy, that not only fails to capture the real value of legal claims, but also ‘weighs’ heavily on all asset managers in terms of compliance and legal costs. Most modern technology and legal science allows not just to analyze and factor the weight of the law in rational decision making, but also to enlarge the scope of viable legal claims and to codify any legal asset, therefore making them more economically valuable. Litigation funders’ higher familiarity and experience with the law compared to other asset managers could prove to be the distinguishing skill and make them not just sustainable – but also thrive – in the “new” codified economic reality. In addition to the books and articles mentioned above, further data for the above analysis can be found in the following forthcoming publications:
  • Physics as model for the law? Sustainability of the litigation finance business model (Journal of Law, Market and Innovation, 2024)
  • Third Party Funding in the EU. Regulatory challenges (Theoretical Inquiries on Law, co-ed. C. Poncibo’, 2024)
  • Third Party Funding in the EU (E. Elgar, co-ed. C. Poncibo’, E. D’Alessandro, 2024)
  • Third Party Funding and Sustainability considerations (E. Elgar, Research Handbook on Investment and Sustainable Development, 2024, co-ed Annie Lesperance and Dana McGrath)
Secure Your Funding Below
Secure Your Funding Sidebar

Commercial

View All
Commercial Regulatory Issues

U.S. Bill Seeks to Ban Foreign-Backed Litigation Funding

By John Freund |

U.S. lawmakers are intensifying their efforts to regulate third-party litigation funding, with Senator John Kennedy (R-La.) introducing the Protecting Our Courts from Foreign Manipulation Act. This bill mirrors H.R. 2675, which is already progressing through the House, and targets alleged foreign influence in U.S. litigation, particularly from state-owned entities and sovereign wealth funds.

Insurance Journal reports that the proposed legislation would prohibit foreign governments and their affiliated investment arms from financing litigation in U.S. courts. It would also introduce mandatory disclosure requirements, compelling funders to report their arrangements to both the courts and the Department of Justice. Additionally, the bill empowers the DOJ’s National Security Division to review and monitor foreign litigation investments as a matter of national interest.

Supporters of the bill, including the American Property Casualty Insurance Association (APCIA), argue that litigation funding sourced from foreign entities presents a tangible threat to national security and economic resilience. APCIA’s senior leadership described it as a “clear and present risk” that could influence legal outcomes and distort the civil justice system.

For the legal funding industry, the implications are significant. If enacted, the law would alter the landscape for funders operating in the U.S. market, especially those reliant on foreign capital. It raises pressing questions about how funders are going to combat this continued assault on the very existence of the industry.

Commercial

A Framework for Measuring Tech ROI in Litigation Finance

This article was contributed by Ankita Mehta, Founder, Lexity.ai - a platform that helps litigation funds automate deal execution and prove ROI.

How do litigation funders truly quantify the return on investment from adopting new technologies? It’s the defining question for any CEO, CTO or internal champion. The potential is compelling: for context, according to litigation funders using Lexity’s AI-powered workflows, ROI figures of up to 285% have been reported.

The challenge is that the cost of doing nothing is invisible. Manual processes, analyst burnout, and missed deals rarely appear on a balance sheet — but they quietly erode yield every quarter.

You can’t manage what you can’t measure. This article introduces a pragmatic framework for quantifying the true value of adopting technology solutions, replacing ‘low-value’ manual tasks and processes with AI and freeing up human capital to focus on ‘high-value’ activities that drive bottom line results  .

A Pragmatic Framework for Measuring AI ROI

A proper ROI calculation goes beyond simple time savings. It captures two distinct categories:

  1. Direct Cost Savings – what you save
  2. Increased Value Generation – what you gain

The ‘Cost’ Side (What You Save)

This is the most straightforward calculation, focused on eliminating “grunt work” and mitigating errors.

Metric 1: Direct Time Savings — Eliminating Manual Bottlenecks 

Start by auditing a single, high-cost bottleneck. For many funds, this is the Preliminary Case Assessment, a process that often takes two to three days of an expert analyst's time.

The calculation here is straightforward. By multiplying the hours saved per case by the analyst's blended cost and the number of cases reviewed, a fund can reveal a significant hard-dollar saving each month.

Consider a fund reviewing 20 cases per month. If a 2-day manual assessment can be cut to 4 hours using an AI-powered workflow, the fund reallocates hundreds of analyst-hours every month. That time is now moved from low-value data entry to high-value judgment and risk analysis.

Metric 2: Cost of Inconsistent Risk — Reducing Subjectivity 

This metric is more complex but just as critical. How much time is spent fixing inconsistent or error-prone reviews? More importantly, what is the financial impact of a bad deal slipping through screening, or a good deal being rejected because of a rushed, subjective review?

Lexity’s workflows standardise evaluation criteria and accelerate document/data extraction, converting subjective evaluations into consistent, auditable outputs. This reduces rework costs and helps mitigate hidden costs of human error in portfolio selection.

The ‘Benefit’ Side (What You Gain)

This is where the true strategic upside lies. It’s not just about saving time—it’s about reinvesting that time into higher-value activities that grow the fund.

Metric 3: Increased Deal Capacity — Scaling Without Headcount Growth

What if your team could analyze more deals with the same staff? Time saved from automation becomes time reallocated to new higher value opportunities, dramatically increasing the value of human contributions.

One of the funds working with Lexity have reported a 2x to 3x increase in deal review capacity without a corresponding increase in overhead. 

Metric 4: Cost of Capital Drag — Reducing Duration Risk 

Every month a case extends beyond its expected closing, that capital is locked up. It is "dead" capital that could have been redeployed into new, IRR-generating opportunities.

By reducing evaluation bottlenecks and creating more accurate baseline timelines from inception, a disciplined workflow accelerates the entire pipeline. 

This figure can be quantified by considering the amount of capital locked up, the fund's cost of capital, and the length of the delay. This conceptual model turns a vague risk ("duration risk") into a hard number that a fund can actively manage and reduce.

An ROI Model Is Useless Without Adoption

Even the most elegant ROI model is meaningless if the team won't use the solution. This is how expensive technology becomes "shelf-ware."

Successful adoption is not about the technology; it's about the process. It starts by:

  1. Establish Clear Goals and Identify Key Stakeholders: Set measurable goals and a baseline. Identify stakeholders, especially the teams performing the manual tasks- they will be the first to validate efficiency gains.
  2. Targeting "Grunt Work," Not "Judgment": Ask “What repetitive task steals time from real analysis?” The goal is to augment your experts, not replace them.
  3. Starting with One Problem: Don't try to "implement AI." Solve one high-value bottleneck, like Preliminary Case Assessment. Prove the value, then expand. 
  4. Focusing on Process Fit: The right technology enhances your workflow; it doesn’t complicate it.

Conclusion: From Calculation to Confidence

A high ROI isn't a vague projection; it’s what happens when a disciplined process meets intelligent automation.

By starting to measure what truly matters—reallocated hours, deal capacity, and capital drag—fund managers can turn ROI from a spreadsheet abstraction into a tangible, strategic advantage.

By Ankita Mehta Founder, Lexity.ai — a platform that helps litigation funds automate deal execution and prove ROI.

Case Developments Commercial

Burford Capital’s $35 M Antitrust Funding Claim Deemed Unsecured

By John Freund |

In a recent ruling, Burford Capital suffered a significant setback when a U.S. bankruptcy court determined that its funding agreement was not secured status.

According to an article from JD Journal, Burford had backed antitrust claims brought by Harvest Sherwood, a food distributor that filed for bankruptcy in May 2025, via a 2022 financing agreement. The capital advance was tied to potential claims worth about US$1.1 billion in damages against meat‑industry defendants.

What mattered most for Burford’s recovery strategy was its effort to treat the agreement as a loan with first‑priority rights. The court, however, ruled the deal lacked essential elements required to create a lien, trust or other secured interest. Instead, the funding was classified as an unsecured claim, meaning Burford now joins the queue of general creditors rather than enjoying priority over secured lenders.

The decision carries major consequences. Unsecured claims typically face a much lower likelihood of full recovery, especially in estates loaded with secured debt. Here, key assets of the bankrupt estate consist of the antitrust actions themselves, and secured creditors such as JPM Chase continue to dominate the repayment waterfall. The ruling also casts a spotlight on how litigation‑funding agreements should be structured and negotiated when bankruptcy risk is present. Funders who assumed they could elevate their status via contractual design may now face greater caution and risk.