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Commercial Deals

Sophisticated Construction Claim Portfolio Design  

The maturity of international litigation finance investment as a serious asset class, combined with new and innovative insurance solutions, is prompting the design of sophisticated litigation asset portfolio architectures. Construction companies are discovering symbiotic advantages by partnering with litigation financiers to aggregate multiple claim portfolios.  Pinsent Masons LLP recently featured guidance for building construction litigation finance portfolio frameworks, engaging insights from their 26 offices spanning four continents. Pinsent Masons urges construction litigation funders to find legacy relationships. Construction customers can benefit from reduced risk by increasing available cash flow, and portfolios can include dozens of claims at mid-range value, coupled with large arbitrations.  Industry CEOs understand the nature of construction litigation pressures on working capital. Contractors are incentivized to nurture a quality relationship with a third party funding partner.
Commercial Deals

2022 Media Spotlight, Probing Financial Crimes via Litigation Investment  

Over the next decade, legal scholars expect an increase in media covering high profile claims involving civil, commercial and financial fraud. A new study shows that more than 51% of cases involving corporate fraud and financial crimes are actively covered by media organizations. Research shows that high profile cases are being funded by sophisticated third party litigation funders, with 17% of companies reporting media scrutiny is to be expected during group legal action(s).  FTI Consulting’s recent 2022 “Resilience Barometer” study includes perspectives from over 3,000 business leaders, including top G20 CEOs, CFOs, COOs, CIOs as well as leading General Counsels. Between 27%-30% of compliance and strategy leaders in business today are concerned about media attention related to a wide range of financial frauds, spanning everything from tax evasion to environmental degradation. And 22% of respondents are planning regulatory investigations over the next 12 months.   FTI Consulting notes that in 2021, 89% of those surveyed planned on receiving claims to legal proceedings that are backed by litigation funders. North America, Europe and Asia litigation investors make up the bulk of high profile cases that are covered by major media outlets.  
Commercial Legal Innovation

AI and Litigation Finance Growth Forecast

Digital Journal has released a new research report that forecasts an uptick in growth for the artificial intelligence (AI) market, specific to litigation finance. Digital Journal outlines that a worldwide exchange of business intelligence is beginning to formulate new ways to engage litigation finance tools, products and services. Meanwhile, Digital Journal floats new concepts on possible strains AI may place on litigation investors, as the dog-eat-dog battle continues for market share.  The report, titled Global Artificial Intelligence in Litigation Funding Markets, offers further insight into a multiyear span, forecasting sales volume(s) between 2020 and 2026. The report provides an in-depth outlook of historical metrics relating to the current market environment. Digital Journal notes a special caveat to the report’s nature specific to artificial intelligence and litigation finance.   Those seeking a preview of the report can find one here.
Commercial Fundraising

Burford Capital Promulgates New $360M Advantage Master Fund

Burford Capital proudly announced a new $360M Advantage Master Fund. A move that is expected to mitigate risk reward potential for the litigation finance juggernaut. Burford’s CEO Christopher Bogart says that the new fund will serve as a structural stopgap facility. Bogart highlights Burford’s uptick in demand for litigation facilities in the middle range.  UK Investor Magazine reports that Burford Capital plans to utilize Average Master Fund proceeds to expand investment in pre-settlement litigation products and services. Burford anticipates the new fund’s internal rate of return (IRR) to range between 12-20%.  The structure of the new fund is an advancement from previous arrangements, according to Burford. Meaning that the fund's investors will receive a flat 10% annual return, with Buford capitalizing on any additional proceeds.   Buford’s CEO says his commensurate fee structure exceeds a factor of 13%.
Commercial

2021: Burford Capital Posts $72M Loss and $1.1B in Commitments

Burford Capital’s group-wide commitments scored $1.1B in 2021 allocations. Meanwhile, net losses came to $72M for the year, a rather significant drop from 2020’s profit of $165M. Burford forecasted a 2021 loss range of $70-80M. The final figures are well in-line with industry expectations. The Law Society Gazette reports that even with 2021 global pandemic disruption(s), Burford managed $152M in total turnover, while 2020 saw $359M turnover.  Meanwhile, the firm calls attention to the ultimate legacy worth of its litigation portfolio, which is expected to generate robust value and shareholder return(s).  Burford’s 2021 operational revenue was $6M. Burford Chairman Hugh Wilson says with $239M in 2020 revenue, 2021’s data may read lower. However, with over $1.1B of ligation agreements booked in 2021, the firm is bullish on a bright future. Chairman Wilson went on to say that Burford generated ample cash flow(s) that exceeded expenditures during the term.   Buford announced an annual June dividend of 12.5c a share, subject to shareholder vote.    
Commercial

The UK’s Rise of ‘No Win No Fee’ Payment Schemes

A poll of 200 law firm partners by third party investor Harbour reveals 90% are under pressure to cut costs and offer clients expanded billing agreements. The poll also shows that 80% of those surveyed are planning to employ no win no fee payment schemes, with 89% expected to engage litigation finance products as a solution.    CityAM.com reports that 40% of those surveyed expect to cut firm expenses, with 37% planning to do so through legal technology. As with any business, driving down costs to maintain revenue generation is smart. CityAM cites the creativity of litigation finance to help lower case investment costs on the balance sheet, with greater opportunity to increase revenues as portfolio assets mature.   CityAM also notes that law firms are tracking a near 2x increase in time to collect receivables. March 2020 figures show a 23-day payment window, which has now increased in 2022 to a payment window of 39 days.
Commercial Regulatory Issues

Paris Court of Appeal on Third Party Funder Precedent

Tricky case law can creep in when least expected. With funders serving as members of the litigation team of advisors, some aim to include litigation investors as co-claimants. The Paris Court of Appeals approached one such instance citing the precedent that third party funders are subject to “exceptional circumstances” before being considered party to arbitration proceedings.  Paris’ Court of Appeals cites that just because a third party investor is involved in a case, this does not constitute exceptional circumstances.   Deminor Recovery Services (USA) Inc. profiles Senior Legal Counsel Mehdi Mellah’s take on the Paris Court of Appeals ruling. The argument is that if a third party funder is a co-claimant in arbitration, that does not necessarily translate to a ‘no’... However, it would take an exceptional scenario for the court to consider a circumstantial ‘yes’. Given the prevalence of third party funding in arbitration proceedings, those on the other side of the case are resorting to clever interpretations of case law as a defense mechanism.  With the fast pace and evolution of litigation finance, international arbitral organizations are updating arbitration rules and regulations. The guiding principle in altering arbitration rules appears to support greater transparency into litigation investor identities.  
Case Developments Commercial

The $300B Shock Verdict and Social Inflation  

A $300B damage award is serving as an example of shock verdicts driving the notion of social inflation. Preserving the ecosystem of litigation finance from shock verdicts is a priority for some in the industry.  Best Review’s monthly insurance magazine highlights the general trepidation of insurers being ‘on the hook’ for high dollar claims that are funded by third party litigation investors. There are those that argue obscene, high-dollar awards are a threat to the judicial system and therefore have the ability to diminish access to justice. Furthermore, litigation finance is blamed for insurance premium spikes–in some cases premiums have increased 25%.  The $300B shock verdict referenced above relates to trucking insurance. The award could potentially be the largest damages verdict in United States history. This, as the insurance industry has worked to clamp down on trucker insurance coverage. Best Review notes that insurance contracts for trucking operations previously allowed for $50M in coverage. Today, insurers have reduced many trucking insurance contracts down to only $1M coverage options.  Best Review references that savvy insurers continue to approach the problem of social inflation with a barrage of solutions, including lobbying dollars on tort reform. Overall, it would appear that insurers are targeting sophisticated third party investors who likely hold a variety of portfolios that include insurance claims.  
Commercial

Elite Litigation Finance Firms 

Pretentious as it may sound, not all litigation finance institutions are created equal. A myriad of common denominators between individual litigation investors tell a story of winners and losers upon close inspection. Just like every other industry, when choosing a litigation funder, quality can be found in industry rankings. That said, there are rankings for top litigation finance firms and also rankings for elite litigation finance firms. The differences between the two terms commonly relate to size rather than overall quality.   Case Works has collated a list of respected litigation funders with exceptional track records with a drive to lead regional rankings. When facing unique legal challenges, oftentimes it can be advantageous to select a boutique third party investor to organize a unique and innovative litigation funding agreement. Clever companies will recognize that the cost of capital in funding meritorious yet profitable legal action is a risk worth taking.  Check out Case Works’ list of seven elite litigation investment companies to learn more.