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Commercial

Investing in Justice via Litigation Finance

“Funding is the lifeblood of the Justice System,” is the famous quote by David Edmond Neuberger, who served as President of the Supreme Court of the United Kingdom from 2012 to 2017. Neuberger teases that quality litigation takes investment. Global legacy stock markets have thrived on financial (cross-border) innovation.   Lawyer-Monthly.com recently exhibited thoughts and ideas arguing that “investing in justice” is the modern elevator pitch for litigation finance.  Even more, Lawyer-Month.com highlights that the evolution of equitbale rule of law (across all global jurisdictions) will hinge on the success/failure of litigation finance systems and process architecture(s). With the cost of quality litigation for meaningful claims, progress to the rule of law hangs in the balance.  No longer is it considered to be “open-minded” when considering alternative third-party solutions to fund and invest in litigation finance. Today, platform technology is widely setting expectation benchmarks for pioneers of the industry. Similarly, the next generation of economic pioneers of litigation finance will have deciphered what use (if any) blockchain software technology and virtual currency hold for litigation innovation.  Lawyer-Monthly.com notes a significant marketing challenge for ligiation finance, corresponding to individual countries. They exhibit and plot a chart of such instances across the globe. 
Commercial

The Global Patent Infringement and Litigation Financing Market 

International patent protection and litigation investment is forecasted to experience exponential growth between 2022 and 2030, according to new research by Absolute Market Insights. New investors into the emerging patent litigation space are expected to implement the foundations for legacy franchises.  Absolute Market Insights’ research reports that the patent infringement marketplace in North America accounted for $183.25M in 2021 revenues. Forecasted compounded annual growth rates for the sector are pegged at upwards of 6% year-over-year. Business patterns in the space are limited by restraints associated with corporate business structures, according to Absolute Market Insights research.  Research signals the importance of technology in any winning business focused on patent litigation finance. With a $3,300 price tag for individual report access, $6,600 for firm access and $7,300 for global access, Absolute Market Insights infers that their research is an investment for anyone engaged in patent litigation finance globally.
Commercial

A Global Litigation Finance Barometer 

All dashboard metrics are signaling that the global litigation finance market is experiencing a renaissance. Corporate directors are embracing litigation finance as a business tool, building litigation portfolios while seeking third party investors to fund successful claims. Risk mitigation is the overarching theme for corporate finance adoption of litigation investment solutions.  Deminor.com published a feature profiling top business benchmarks for the global litigation finance industry. One risk management benefit of litigation finance is that funders have a wide berth of active jurisdictional insight, meaning that corporate finance directors can piggyback on a funder’s knowledge of successful jurisdictional avenues for claim success. Likewise, balance sheet earmarks for litigation have traditionally been a headache for international enterprise, as quality litigation tends to be expensive.  Corporate directors are keen on turning to litigation investors to offset balance sheet line items. With the balance sheet freed up from costly litigation budgeting, many are discovering the benefits of funds being invested back into the business for research and development. Smaller agencies have often felt outgunned when debating whether to pursue a potential litigation scenario. Deminor suggests that litigation finance shoulders the burden of equal access to justice, and that considering costs should not be a factor for meaningful claims. 
Consumer

Lawsuits May be the Only Valuable Possession of Newly Released Prisoners

Chicago has been called the ‘wrongful conviction capital’ for its policing tactics that allegedly lead to bullying defendants into false confessions, or withholding evidence that would clear a wrongly convicted individual. Being released from prison after a wrongful conviction is obviously better than the alternative, but the newly released prisoner must then contend with starting life over from scratch. Bloomberg Law explains that the only asset someone in this position might have is a lawsuit. Enter litigation funding. A newly popularized focus on ESG investments (those involving environmental, social justice, and government-focused issues) is leading to greater availability of funding for recent exonerees. While the funding is provided on a non-recourse basis, if a case is successful, as much as three times the funded amount may be owed back to the funders. Compensation for time spent in prison for wrongful convictions can happen in two ways. In most states, verifying innocence will earn compensation. Alternatively, if it can be proven that a wrongful conviction occurred due to police misconduct, a civil lawsuit can be very lucrative. The recently exonerated may be reticent to accept third-party funding, even non-recourse funding, due to what is viewed as the excessive fees and percentages that return to funders when cases are successful. Funders in turn assert that fees are commensurate with the financial risk they assume—which is 100%. At the same time, these newly released prisoners may find themselves in such dire financial straits that they have little choice but to accept funding. Even under the best of circumstances, successful outcomes can take years to realize. The good news is that many funders do see that there are moral, ethical, and financial motives to offer help to exonerees. This is the essence of increasing access to justice, which is what Litigation Finance does best.
Commercial Regulatory Issues

The Complexities of Third-Party Legal Funding in India

Litigation Finance is alive and well in India and was affirmed to be in line with public policy since the Ram Coomar Coondoo and Others v Chunder Canto Mookerjee (1876) case. Like most other jurisdictions that have embraced the practice, Indian courts accept that litigation funding expands and promotes access to justice. Furthermore, India has abolished outdated concepts like champerty and maintenance. RKA Associate explains that in India, a Privy Council mandates that funding agreements may not be entered into for gambling purposes. Agreements must also be free of extortion and moral wrongdoing in order to be in keeping with public policy. Suganchand v Balchand tested this mandate when one party was accused of gambling on a case for a large profit—and the agreement was not legally upheld. Indian law is largely derived from English Common Law. But as India now has a large and thriving economy, plus an advanced legal system, the country is now dealing with various complexities without relying on English Common Law. Some of the Litigation Finance complexities India is currently addressing include:
  • Conflicts of interest. Third-party funders may have existing relationships with arbiters or judges, which could influence decisions and is counter to the interests of a fair proceeding.
  • Confidentiality. Courts continue to grapple with whether or not funders can negate attorney-client privilege. Obviously, this is a vital issue that requires uniformity across jurisdictions.
  • Codes of Conduct. India does not have a legally enforceable code of ethics for funders. It’s suggested that instituting qualifications for becoming a funder may actually help the industry grow and reduce the potential for malfeasance.
  • Public Policy. The morals of a society can evolve over time, which means enacting rigid laws can be more restrictive than helpful.
Like much of the developed world, legal costs are high in India, impacting access to justice for most people. India has recognized the importance of TPLF, and in all likelihood, will continue to develop a legal framework in which the industry can thrive.
Commercial

Recoverability of Success Fees & ATE Premiums in Commercial Litigation

Should success fees from conditional fee agreements or after-the-event insurance premiums be recoverable in commercial litigation cases? The debate rages despite a decade-old ‘Jackson Review’ affirming that non-recoverability of these expenses reduces legal costs—a net gain for courts and the public. Dispute Resolution Blog explains when the precedent for non-recovery was defined, the Jackson Review (and the 2012 LASPO Act) was focused on the glut of personal injury and medical negligence cases in the early 2000s. Soon after, the use of conditional fee arrangements was expanded and after-the-event insurance was introduced. This led to unprecedented growth spurred by law firms seeking a high volume of cases—knowing that costs would be recovered. At the time, the belief was that more cases meant more income—which put an undue focus on quantity over quantity. That is not the case in modern Litigation Finance. Contemporary funders are known for carefully vetting cases to ensure that they have merit, are likely to be successful, and that defendants will have the ability to pay an award. It’s worth noting that the Jackson Review is a 584-page document. Only 7 pages of which address commercial litigation funding. That implies that, while worth a mention, third-party legal funding wasn’t believed to be a problem even then. With that in mind, it may make sense to revisit the issue of recoverability. Given the myriad differences between, say, commercial claims and personal injury cases, it could be argued that these necessitate different frameworks. An appeals court judgment from 2019, Peterborough & Stamford NHS Trust v McMenemy and one in Reynolds v NUHF Trust made exceptions regarding the recoverability of ATE premiums in specific instances. Non-recovery is not a new concept, but it does appear to be based on outdated mores and practices that simply aren’t feasible today. Surely it’s time to revisit the issue to reach a more modern conclusion on recoverability.
Announcements Commercial Deals

New research on affirmative recovery programs reveals opportunity for legal departments to add value

Burford Capital, the leading global finance and asset management firm focused on law, today releases new independent research demonstrating that companies can unlock value in their legal departments through more systematic affirmative recovery programs. As revealed by extensive one-on-one interviews with over 50 general counsel, heads of litigation and other senior legal leaders at major corporations globally, most companies have affirmative recovery programs to recover money for the business by pursuing meritorious litigation and arbitration claims when their companies are harmed. Still, many see room for improvement, with those with more systematic affirmative recovery programs showing the benefits of doing so. Christopher Bogart, CEO of Burford Capital, said: “Our latest independent research is consistent with my own prior experience as a GC. Done right, affirmative recovery programs can transform in-house legal departments from cost centers to revenue generators, greatly enhancing the commercial standing of senior legal leaders in their companies. “GCs benefit from hearing from their peers and from having the right tools and partners. In that spirit, we hope this new research helps companies and law firms alike realize the value of affirmative recovery programs in maximizing corporate value, and that by adding legal finance to the mix, they can greatly increase certainty around their litigation budget and cash flows.” Key findings from the research include: •    Affirmative recovery programs are expanding but are still rarely robust. o Affirmative recovery programs are increasingly common, with two of three GCs, heads of litigation and other senior in-house lawyers interviewed saying that their companies have an affirmative recovery program. However, only a few legal leaders say their programs are robust. ▪ Three of five GCs interviewed say their companies neglected to pursue meritorious recoveries. ▪ Half of all GCs interviewed would exchange some upside on pending claims in exchange for removing costs and downside risk of loss. Senior in-house lawyers recognize that when they do pursue affirmative recoveries, new tools to increase certainty and manage costs will lead to better results. ▪ Three of five GCs interviewed say quantitative financial modeling would be advantageous to affirmative litigation recoveries. •    Legal finance has a role to play. o In-house lawyers whose companies use legal finance consistently say their companies have robust affirmative recovery programs that meet their needs. o Senior in-house lawyers admit to varying levels of knowledge about legal finance, but many are hungry for more information—and many remain unsure about how it works. o Reputation and experience top in-house lawyers’ priorities when selecting legal finance partners. •    More systematic affirmative recovery programs benefit organizations, teams and leaders. o Interviews with senior in-house lawyers suggest that more effective affirmative recovery programs benefit the overall enterprise, elevate legal within the organization and earn credit for legal teams for innovation and cost and risk management. •    Key quotes from the report: o “Everything about what I do is about the value that the legal department generates for the company, so new creative ways of generating revenue and reducing risk is very appealing.” (GC, multinational logistics company) o “If you are on the plaintiff’s side, you can finance your claims through a legal finance company if the business does not want to lay out the expenses, which is great. The lawyers need to understand that this option is available.” (GC, capital market company) o “My peers are speaking about claims as assets, which was not part of the conversation five years ago.” (Head of litigation, multinational retail corporation) o “We don’t leave a dime on the table.” (GC, capital market company) o “In the last five years, we have probably recovered over $1 billion in settlements or other recoveries.” (Group GC, privately held construction company) The 2022 Affirmative Recovery Programs Report can be downloaded on Burford’s website. The research report is based on 1:1 interviews conducted by phone with 52 general counsel, heads of litigation and other senior in-house lawyers with direct responsibility for their companies’ commercial litigation and arbitration. The interviews were conducted between October and December of 2021 by Ari Kaplan Advisors. About Burford Capital Burford Capital is the leading global finance and asset management firm focused on law. Its businesses include litigation finance and risk management, asset recovery and a wide range of legal finance and advisory activities. Burford is publicly traded on the New York Stock Exchange (NYSE: BUR) and the London Stock Exchange (LSE: BUR), and it works with companies and law firms around the world from its principal offices in New York, London, Chicago, Washington, DC, Singapore and Sydney. For more information, please visit www.burfordcapital.com.
Commercial

Litigation Finance Bounces Back as Normalcy Returns

Like many industries, Litigation Finance experienced a slowdown during much of the COVID pandemic. Now that some sense of normalcy is approaching, backlogs will be addressed and deal flow is expected to accelerate. Alpha Week notes that contrary to predictions, legal activity decreased by 85% during COVID. While businesses have not yet returned to pre-pandemic levels, many in the legal and financial fields assert that it soon will. The three most developed markets for Litigation Finance include Australia, the United States, and the United Kingdom—with India and Singapore being considered welcoming jurisdictions for litigation funders. India’s newly developed bankruptcy and insolvency framework has provided a foundation for the practice of TPLF. It’s noteworthy that in India, every firm’s financial records are public information. This means it’s easy to access records from a defendant company to determine whether they can pay a judgment or award. If they can’t, funders are unlikely to offer assistance. Small law firms are especially likely to utilize legal funding, but it can be used by firms of any size, as well as businesses, claimant classes, and individuals. The flexibility and adaptability of the litigation funding industry allow for monetizing individual claims or portfolios of cases, and may involve selling legal claims in exchange for money that can be used for operating costs or expansion. The litigation funding industry has no shortage of capital. Late last year, Longford Capital raised nearly $700 million for its new fund. Lexshares, an NY-based funder, raised $100 million. Insiders say these numbers are merely scratching the surface of the available opportunities. The industry shows every sign of growth, and no signs of slowing.
Commercial Fundraising

Henderson & Jones Innovates With New Financing

London-based Henderson & Jones (H&J) is a boutique litigation finance firm with a focus of buying and selling insolvency claims. H&J prides itself on maximizing returns through strategic litigation by shouldering the risk and costs associated with winning a successful claim.  BDaily.co.uk reports that H&J has arranged £5MM in working capital from Secure Trust Bank Commercial Finance to help fuel innovation and growth inside the firm. With a history of litigation finance success for claims in the ballpark of £50MM, H&J is battling to challenge malfeasance in the legal sector by facilitating access to justice.  H&J’s managing director expects growth in supporting appropriate first-class litigation finance opportunities, further noting that profitability in the sector is on the rise with new efficiencies in systems and processes. H&J’s new working capital facility is expected to add comfort to the management team’s future plans and directives.