Litigation funders often discuss the benefits of third-party funding for corporates in terms of shifting legal costs off their balance books, allowing companies to pursue beneficial litigation without incurring significant financial risks. Looking ahead to a year that will likely see corporate CFOs under financial pressure from market instability and potential recession, one funder has put forward its view on how CFOs can leverage legal finance to create value. Writing in the Burford Quarterly, Jordan Licht, chief financial officer at Burford Capital, suggests that CFOs should look at opportunities to turn the legal department into a domain for generating liquidity, rather than being a cost center for the company. Firstly, Licht emphasizes that where companies are able to leverage third-party funding, viable litigation claims should be treated like assets by CFOs, given the fact that they have the potential to return significant value without taking financial risk. Secondly, Licht puts forward the option of legal finance monetizations, where working capital is provided to advance part of an ongoing claim or outstanding award, thereby unlocking fresh liquidity for a CFO that can then be used for any other business priority. Finally, Licht returns to the key pillar of how CFOs should be using litigation finance: by reducing expenses and preserving capital during tough economic times, without needing to sacrifice the opportunity and financial return of pursuing legal claims.

Disclosure remains one of the hottest topics in the world of litigation funding, as courts, legislators and pressure groups are all weighing in on the level of transparency that should be required for funding arrangements. However, a recent ruling from the Eastern District of Texas has reinforced the principle that funders and their clients should still be permitted a reasonable degree of confidentiality when it comes to documents shared under non-disclosure agreements. Analysis by Lake Whillans summarizes a decision from the Hardin v. Samsung Electronics case in Texas, where the court ruled the legal memoranda shared between a plaintiff’s counsel and prospective funders should not be open to discovery. In this patent infringement case, the defendant had sought discovery of a confidential memorandum that counsel had provided to funders prior to filing suit, arguing among other reasons that it was necessary to see the information in these documents relating to “valuations placed on [Plaintiff’s] patents”. The court did not find merit in Samsung’s arguments, holding that such documents were in fact protected attorney work, having been shared under a confidentiality agreement. This judgement aligned with the 5th circuit’s precedent that this kind of document should be protected from discoverability, given that its "primary motivating purpose” was to “aid in possible future litigation”. Despite the ongoing battles around disclosure and discoverability in patent infringement cases, funders will no doubt welcome the continued recognition of the principle of confidentiality between plaintiffs, their counsel and funders.

Acknowledging both the industry’s global growth and the resurgence of critiques from those opposed to third-party funding, Validity Finance’s CEO offers his perspective on expectations for the litigation finance industry in 2023. In an opinion piece for Bloomberg Law, Ralph Sutton, founder and CEO of Validity Finance, argues that whilst U.S. funders have already expanded to major cities nationwide, he expects that funders will soon look to set up operations in smaller cities, including Denver, Palo Alto and Seattle. Importantly, Sutton notes that these locations will not see the same level of high-value cases that funders are used to reviewing in New York, but will add significant volume to bolster returns. Sutton also spotlights the increasingly important role that insurance is playing in the litigation finance space, predicting that this year will see more brokers emerge, and similarly, that there will be parallel growth in new tailored insurance products that funders will utilize. In addition to the tighter relationship between funders and insurers, Sutton suggests that funders will look to bolster their strategic relationships with law firms that go beyond the provision of capital, by providing value through portfolio structures. Finally, Mr Sutton emphasizes the need for broader education and awareness around the use of funding and its technical intersections with the existing legal structure, both for existing legal professionals, but equally importantly at the law school level.

AxiaFunder, the innovative litigation funding platform, has achieved a new milestone in the company’s trajectory, as it has been granted direct authorization from the Financial Conduct Authority (FCA) in the UK. This latest step follows a strong 2022 for the funder, having launched a new portfolio product in July of last year. An article by Peer2Peer Finance News reveals that AxiaFunder was directly authorized by the FCA last week, allowing it to further streamline its operating model. The funding platform had previously acted as an appointed representative of principal ShareIn, who will now act in a supporting role by providing AxiaFunder with compliance and onboarding services. AxiaFunder’s chief executive, Cormac Leech, stated that now that it has been directly authorized by the FCA, the company can focus on its growth plan which involves establishing working relationships with law firms and brokers to maximize its inflow of easy-to-process and smaller scale cases. Leech outlined the funder’s 2023 objective to achieve £1 million in funding per month by the end of the year.

The arena of international disputes saw a hive of activity in 2022, as jurisdictions around the world began to return to a faster pace in the wake of the pandemic and disruptive sub-sectors of the economy, bringing new areas of opportunity for litigation. Looking forward to the next 12 months, the founder of one of London’s boutique litigation firms has put forward her top trends to watch in the world of international disputes. Writing in The Global Legal Post, Natasha Harrison, founder and managing partner of Pallas Partners, has identified five key factors that she is keeping an eye on for 2023. Firstly, Harrison pinpoints securities litigation as being a lucrative area moving forward, driven by a healthy appetite for investment from litigation funders and opportunities for in-house counsels to generate significant financial gains from successful litigation. Looking at the global economic instability and ongoing financial pressures on businesses, Harrison also sees restructuring and insolvency disputes as a potential hotbed of activity. Similarly, fraud-based litigation is identified as another growth area, partially resulting from the aftereffects of the Covid-19 pandemic, and the misuse of relief funds from state governments. Moving into the world of acquisitions and transactions, Harrison points to a rise in private equity disputes as a key growth area, driven by the fallout from the high volume of transactions in 2020/21 that may come under scrutiny for issues around improper valuations or misrepresentation of financial statuses. Finally, Harrison sees competition litigation as fertile ground for increased activity, and once again, another area where the influence of litigation funding could play a significant role.

Bitcoin Satoshi Vision (BSV) launched with high hopes of digital asset innovation. Once at a market value over $8.1B, today BSV hovers around an $850M market cap. Softwhale, a litigation finance investment vehicle for digital assets, is now representing 243,000 UK residents in a first of its kind digital asset anti-competition trial. The fund is looking to clawback over £9.9B in damages from exchanges that delisted BSV trading activities.  BNN Bloomberg profiles Robert Buckland MP (UK's former Lord Chancellor and Justice Secretary) and Lord David Currie (UK's first chairperson of the Competition Markets Authority) who are the founders of BSV Claims Limited. Lord Andrew Tyrie (former UK Conservative lawmaker) has been named to represent the firm's advisory board. Likewise, BNN Bloomberg reports controversial digital asset entrepreneur Calvin Ayre has launched Softwhale out of Antigua. Ayre is the CEO of Bodog, an online gambling platform and is the-self proclaimed 'largest BSV blockchain investor.’  BSV Claims Limited and Softwhale aim to reset BSV's utility as a legitimate digital asset investment. Both firms claim that anticompetitive behavior has defrauded investors and is the chief reason behind the downfall of BSV. 

As LFJ reported last week, the UK financial services sector is bracing itself for a surge in litigation this year, as leading British banks look to be on the receiving end of a wave of class actions. However, this may not be the only driver of litigation activity for financial services entities in 2023, as a new study suggests that last year’s pension funds crisis could catalyze another wave of lawsuits targeting asset managers and advisers. Reporting by the Financial Times covers new research by the London Solicitors Litigation Association (LSLA), which found that UK lawyers are expecting a rise in legal activity relating to the fallout from the government’s ‘mini-budget’ and the impact on liability driven investment (LDI) strategies in September 2022. The LSLA’s president, Nicholas Heaton, suggested that it was likely that LDI-related lawsuits would begin to appear, and that whilst the volume of such claims was less certain, he highlighted that the presence of litigation funders would continue to drive the growth in class action suits. However, Anna Rogers, senior partner at Arc Pension Law, pointed out that the viability of these LDI claims and their ability to successfully receive significant compensation will not be straightforward. Rogers highlights that asset managers facing such litigation may be able to offer a credible defense by putting the burden of understanding on pension trustees, who could in turn place blame on investment consultants.