Westfleet Advisors has published its fifth annual Litigation Finance Market Report, providing a data-driven overview of the commercial funding industry in the United States from 1 July 2022 to 30 June 2023. Westfleet summarises its findings as ‘indicative of an industry in a state of flux, with some notable players exiting the industry, numerous professionals making lateral moves, and capital commitments to new deals contracting by nearly 14%.’ With regard to the decreasing volume of new capital commitments, Westfleet attributes this trend to the difficult global economic conditions that are affecting all industries, rather than a decline in demand for litigation funding.Despite this contraction on new capital, Westfleet still found that ‘many funders thrived both in terms of new capital raised, capital committed to new deals, growth in their headcount, and profitability.’ Westfleet’s report suggests that the data from 2023 indicates that the market is still favourable for those established funders ‘with strong track records and a proven ability to consistently attract new capital.’Key highlights from the 2023 report include:
$15.2B in assets under management for 2023, representing a small increase from $15.1B in 2022
$2.7B in new commitments to deals in 2023, down from £3.2B in 2022
The average deal size declined from $8.6M in 2022 to $7.8M in 2023
This was driven by a reduction in the average size of portfolio deals from $10.5M in 2022 to $9.9M in 2023
In contrast the average size of single-matter transactions increased from $4.3M in 2022 to $4.8M in 2023
The share of new capital dedicated to claim monetization reached 21% in 2023, continuing the upward trend from 14% in 2022 and 8% in 2021
To read the full report from Westfleet Advisors, click here.
A new piece of analysis by Nick Rowles-Davies, founder and CEO of Lexolent, sheds light on the current state of the litigation funding market post-PACCAR.
As is customary of Rowles-Davies, his analysis pulls no punches. Writing on LinkedIn, he opines that industry stakeholders have varying perspectives on the Litigation Funding Agreements Bill. Despite the Supreme Court's judgement and the industry's claims of adaptability and compliance, not all funders operate transparently, according to Rowles-Davies. The speed of the proposed new legislation and the lobbying efforts to expedite its implementation have also raised concerns.
The litigation funding industry is diverse, with different funders operating in different ways. There is a growing call for regulation, particularly as 90% of the London Solicitors Litigation Association believe it's time for the industry to be regulated. The PACCAR decision has created uncertainty and led to attempts to reopen concluded deals. As a result, a thorough review by the Civil Justice Council is needed.
The proposed 'Litigation Funding Agreements (Enforceability) Bill' aims to restore the pre-PACCAR regime, allowing individuals and small businesses to fund large claims against corporations. While many eyebrows have certainly been raised, the litigation funding industry isn't going anywhere any time soon, even if future regulation is on the horizon.
Michael Perich is a Senior Vice President and Head of Litigation Insurance in the Transaction Liability Practice at Lockton. Prior to joining Lockton, Michael spent much of his career working at the world’s largest litigation finance company, Burford Capital, as well as a Chambers-ranked litigation finance broker, Westfleet Advisors. In these roles, he helped a wide range of clients—including multinational corporations and AmLaw100 firms—use innovative litigation finance structure to achieve their financial objectives.
Michael is also a former litigator, having represented clients on contingency fee, alternative fee, and hourly fee arrangements. He now uses those skillsets to help his clients structure bespoke insurance policies designed to help his clients achieve their financial objectives.
Michael has been recognized by LawDragon as one of the top 100 Global Leaders in litigation finance and is listed in the IAM Strategy 300, a guide listing individuals who innovatively create and action strategies which realize and amplify the worth of IP portfolios.
Company Name and Description: Lockton is the largest privately held global insurance brokerage that provides outstanding risk mitigation and claims management through the application of modern insurance strategies. With expertise in risk management, property and casualty, employee benefits/people solutions, professional and private risk, we help our clients protect what matters to them most: people, property, and their bottom line.
Area of Focus: Litigation Funding and Contingent Liability Insurance products
Member Quote: Having ventured into the field of litigation finance almost ten years ago, I remain repeatedly astounded and impressed by the growth and increased sophistication the market has exhibited in recent years. The progress has been truly remarkable, and I feel grateful to be involved in this dynamic industry.
The Post Office scandal, and its rise to the forefront of public attention in the UK, has been repeatedly cited as a prime example of the crucial role that litigation finance plays in securing access to justice for victims. However, arguments over the legal costs and funder’s returns in this case continue to be aired, as a lawyer for one of the subpostmasters is calling on regulators to get involved.Reporting by The Telegraph, and shared by Yahoo Finance, reveals that one of the subpostmasters in the Post Office Horizon litigation is calling for the Solicitors Regulation Authority (SRA) to investigate the legal fees paid out from the £58 million settlement fund. The subpostmaster’s lawyer, Jim Diamond, has written to the SRA after he has repeatedly asked for additional information from Freeths, the firm which represented the victims in the case, about how the settlement was divided between the law firm, litigation funder and the claimants.Mr Diamond explained in his letter that he has twice asked Freeths to provide the information along with supporting documents, but the law firm has rebuffed his outreach and said that as the litigation is now closed, they are not open to engaging on the subject. Diamond is asking the SRA to clarify whether the law firm is obligated to comply with his request and provide the documents to their former client, the postmaster.Mr Diamond also used the letter to criticise the recent article written by Neil Purslow, founder and chief investment officer of Therium Capital Management. In the guest article published in The Times, Purslow had refuted suggestions that Therium’s remuneration accounted for 80% of the settlement fund. In his letter to the SRA, Diamond argued that Therium’s founder should not have discussed the breakdown of costs in public, as these details are ‘private and confidential.’At the recent Brown Rudnick European Litigation Funding Conference, Mr Purslow once again denied the claims about an ‘80% payout’ to Therium and offered a detailed explanation of the funder’s involvement in the case.
As LFJ reported last month, the ongoing saga of Burford Capital and Sysco’s antitrust lawsuits continued, as both parties appealed a Minnesota judge’s denial of a joint request for the substitution of plaintiff in the antitrust case. As we wait to see the outcome of that appeal, Burford and its subsidiary, Carina Ventures, have secured a favourable ruling in another antitrust case in the United States District Court for The Northern District of Illinois.Reporting by Reuters provides the latest update on the Sysco antitrust cases funded by Burford Capital, as U.S. District Judge Thomas M. Durkin granted Sysco’s request to assign the ‘Broiler Chicken Antitrust Litigation’ to Burford’s affiliate company, Carina Ventures. The Illinois judge rejected each of the arguments brought by the defendants who objected to the substitution, stating: ‘An invalid assignment might have been a reason to deny the motion. But the Court has rejected those arguments.’Explaining his decision to grant the substitution of plaintiff in the case, Judge Durkin said that “despite defendants protestations to the contrary, the assignment does not appear to be a very unusual circumstance either.” He further reasoned that “such assignments are a fact of modern litigation”, and therefore he had no reason to “interfere with sophisticated parties’ business decisions."The favourable ruling in this poultry case in Illinois will be welcomed by Burford Capital and Sysco, as their efforts to similarly reassign the pork antitrust claim in Minnesota were denied last month. Whilst the initial denial of their request for substitution of plaintiff in that case was disappointing, Burford will no doubt see Judge Durkin’s ruling as a positive factor in their appeal of the Minnesota court order.
As the litigation funding industry continues to evolve, Louisa Klouda, CEO of Fenchurch Legal shares insights into the sector and Fenchurch Legal’s approach and practices. Below is our LFJ Conversation with Louisa Klouda:
What drew you to the world of litigation funding?
My entry into the world of litigation funding wasn't a direct one, but rather a spark of curiosity during my previous role in corporate finance and the asset-backed lending world. I came across the concept of litigation funding and found myself instantly drawn to its unique characteristics. I discovered a market dominated by large funders focusing on large cases like class actions. However, I noticed a significant gap: a lack of support for smaller claims, particularly in areas like housing disrepair and the challenges the law firms faced in accessing funding for these meritorious claims. Recognizing the gap in the small-claims market, I saw an opportunity to create Fenchurch Legal in 2020. The aim of the business was twofold: to facilitate access to justice for smaller claims and to provide an avenue for investors looking for alternative investment opportunities.
Can you provide an overview of small ticket litigation funding and its significance in the UK legal landscape?
Small ticket litigation funding plays a vital role in the UK legal landscape, offering an alternative approach to financing legal claims. In essence, it involves providing funding to law firms for smaller value cases across various areas like personal injury, housing disrepair, and financial mis-selling, unlike large-ticket funding which targets high-stakes class actions. Small-ticket funders like Fenchurch Legal focus on quantity, funding a high volume of smaller cases. These case types have clear legal precedent, and are protocol-based and process-driven consumer claims, with high success potential. This subset of litigation funding addresses a gap in the legal financing ecosystem created by rising legal costs and resource-intensive cases. Small ticket litigation funding ensures that even modest claims, like housing disrepair receive the backing necessary to navigate the legal process, ultimately facilitating access to justice and contributing to a more balanced and inclusive legal landscape.
How does this subset of litigation funding attract investors?
The appeal of small-ticket litigation funding to investors is multifaceted, driven by three key factors - flexible entry points, portfolio diversification, and unique security features. Firstly, it provides investors with lower entry points compared to larger funders. This is particularly attractive to those moving away from traditional markets and seeking a more balanced investment approach with steady returns. The accessibility of smaller minimum investment amounts aligns with the preferences of investors aiming for a diversified and resilient portfolio. Small-ticket funders focus on quantity, funding a high volume of smaller cases. This diversification approach effectively spreads the risk across various law firms, multiple cases and case types, reducing the reliance on the success of a single case. Investors are drawn to the stability and risk mitigation inherent in this investment strategy. Moreover, investors like the insurance-backed nature of this investment. All cases are supported by an After the Event (ATE) insurance policy, covering all costs and disbursements if the case is unsuccessful. Additionally, upfront interest is charged, debentures are in place and there is an assignment over the case proceeds.
How has Fenchurch emerged and established itself in this market, and what key strategies contributed to its growth?
Our key strategy is to have a niche focus on smaller claims within specific case types where we have a deep understanding and only partnering with fully vetted law firms. Recognizing growing interest in litigation funding as an alternative asset class, Fenchurch strategically lowered investment entry barriers making it a more accessible investment solution. This has enabled us to broaden our investor base, enabling us to raise more capital and support a wider range of law firms seeking funding.
How have you seen the landscape of small ticket litigation funding evolve, and what trends do you anticipate for the future?
There's a noticeable shift towards recognising the significance of smaller-scale claims in the funding market. I anticipate the market to continue its expansion into new case types beyond traditional areas but with that will come changes in the regulatory landscape, potentially impacting market dynamics and requiring adaptation from funders. As a funder specialising in small ticket claims, especially those funded at volume, staying ahead of regulatory changes is important. We remain cautious about specific case types, recognising that shifts in litigation trends could render a case type unviable, as witnessed in the Road Traffic Cases (RTA) cases when fixed costs were brought in. Funders must develop a broad network of contacts to stay informed about evolving market conditions. Another trend I see growing is wider tech adoption within the industry. Technology is playing a pivotal role in streamlining processes, enhancing risk assessment and driving efficiency and scalability. Recognizing the limitations of off-the-shelf solutions, we developed our own loan management software, providing a bespoke platform for managing loan repayments, monitoring, and onboarding. Continued tech integration is needed to enable automation, boost efficiency, enhance risk assessment capabilities, and improve investor reporting. I also see increased awareness and interest from investors. I think small-ticket litigation funding will become increasingly more attractive as investors become more familiar with the potential benefits and opportunities, resulting in a rise in investment inflows. Lastly, the focus on Environmental, Social, and Governance (ESG) considerations is likely to gain prominence, influencing investment decisions and funder strategies. The growing recognition of the value and impact of small-ticket litigation funding aligns with ESG requirements.
What sets Fenchurch Legal apart from other funders? What are your unique value propositions?
Our core strength lies in our deep understanding of the small-ticket claims landscape. We have developed a rigorous and data-driven selection process tailored to this specific segment, allowing us to identify top-tier law firms and high-potential case types with lower individual risk profiles. Through discussions, we've learned that law firms often face challenges with other funders, including issues like complex drawdown procedures, undisclosed fees, and the non-funding of crucial costs like WIP capital or case acquisition expenses. Recognizing these pain points, we've developed an offering specifically designed to avoid these issues. As mentioned before having access to our own proprietary software has been a game-changer. It has significantly enhanced our whole business operations, driving efficiency and enabling us to scale. This technological edge not only sets us apart but also positions us as an innovative and forward-thinking player in the industry. Additionally, our team is a vital component of our unique value proposition. Made up of experienced professionals who understand the industry, our team ensures we look thoroughly at both legal merit and financial viability. This dual expertise ensures that every funding decision is based on a thorough understanding of the legal intricacies and financial soundness of each case.
Could you elaborate on your approach to case selection and investment criteria?
Our selection process is multi-layered, considering both legal merit and financial viability. In the initial stages, we conduct an in-depth evaluation of case strength, law firm expertise, financial strength and claim history, while also examining the specific legal and procedural landscape surrounding each claim. After completing the underwriting process, we grant each firm a facility limit. They can regularly draw down against this limit, as long as they adhere to the terms of the agreement, including providing a list of claims for auditing and granting us access to their systems. We also employ robust financial modelling and stress testing to evaluate potential returns and manage risk effectively. This approach ensures we invest in case types with strong success potential and manageable risk profiles. So far, we’ve funded various case types with strong merits, including Plevin, Motor Finance Mis-selling (PCP), Tenancy Deposit Schemes, and Housing Disrepair claims. Our compliance criteria for each case type involve thorough vetting, examining details such as case referrals, fee earners, and the experience of law firms. This process enables us to partner with trusted law firms, further mitigating risks associated with our investments. Importantly, Fenchurch Legal only provides funding for cases where After the Event (ATE) insurance has already been obtained. This insurance covers costs and disbursements in the event of an unsuccessful claim. By advancing the premium directly to the ATE Insurer, we ensure that each policy is live at the time of funding, adding an extra layer of security to our investment strategy. This unique security feature enhances the attractiveness of funding ATE claims, aligning with our commitment to minimising associated risks.
The recent PACCAR ruling in the UK has sparked discussions about the future of litigation funding. What are your thoughts on its implications and potential impact on the industry?
The recent PACCAR ruling didn’t impact Fenchurch as our small ticket business model is focused on charging a fixed return per case, regardless of the outcome and not a percentage of damages recovered. However, whilst the ruling presents certain challenges, I believe it ultimately presents an opportunity for the industry to strengthen its practices and regulations.
Could you share your vision for Fenchurch Legal's future growth and expansion plans?
We plan to maintain our focus on small-ticket litigation funding, leveraging our experience, growing our loan book, and onboarding new borrowers. As the business grows, we plan to deploy more capital aiming to reach a loan book value of £75 million within the next two years. We will also recruit key roles to bolster our team.
Lastly, for investors considering small ticket litigation funding, what key factors should they take into account, and how can Fenchurch Legal add value to their investment strategies?
For investors contemplating small ticket litigation funding, several key factors should be carefully considered to make informed and strategic decisions. Firstly, understand the specific criteria and due diligence processes the litigation funder uses and pay attention to their track record in managing and funding small ticket claims. Risk management is vital and investors should seek funders with robust strategies in place. This includes an assessment of how the funder mitigates risks associated with smaller claims and adapts to changing circumstances. In the case of Fenchurch Legal, our approach to small-ticket litigation funding is grounded in a commitment to comprehensive due diligence, case assessment, and risk management. We have created an offering suitable for investors seeking diversification, lower risk profiles, access to a broader market, and lower entry points.
A Manchester firm has signed a groundbreaking €25 million deal to support a pioneering Spanish legal tech company, renowned for its expertise in handling claims related to cartel price fixing.
In a bid to increase access to justice across Europe, IQuote Limited will provide financial backing to Málaga based Cartel.es as it looks to expand across the continent. The Spanish company, which is the trading name of LegalTech Ventures S.L, was founded to tackle the vehicle cartel price-fixing scandal, which implicated 23 vehicle manufacturers from 2006 - 2013.
For two decades, Spain has seen a rise in these cartels involving companies in the same sector covertly fixing prices, sharing territories and customers, and exchanging sensitive commercial data.
The scandal, brought to light by the National Markets and Competition Commission (CNMC) in 2015, is thought to impact about 9.7 million consumers in Spain. This latest agreement to supply a funding facility of up to €25 million, is aimed to support Cartel.es in its expansion across Europe.
Craig Cornick, IQuote’s CEO and founder, said the investment is a strategic move to help more people across Spain obtain the justice they deserve. “Cartel.es is doing a very important job for the people affected by these corporate cartels and we couldn’t be prouder to be supporting the firm’s mission. The investment will not only provide financial backing to the company but also make justice a tangible reality for those in Spain and beyond.”
Cartel.es has made significant investments in proprietary technology allowing it to assess and quantify each claimant before court proceedings, facilitating faster resolutions. Co-founder and Chief Investment Officer, Adam Peake, said: “We are very proud of the work that we do. These types of claims are not easy to approach so we are very excited to be partnering with IQuote, which has such a track record when it comes to complex legal matters.
“We’ve seen tremendous success so far and we’re looking forward to IQuote’s support and expertise in making lasting contributions to the European legal landscape, bringing justice closer to more people.”
Founded in 2016, IQuote Limited, specialises in legal asset and opex capital loans, with a primary focus on legal asset investing. The firm is constantly pushing for inventive solutions and investment opportunities to firms in the legal, technology and customer service sectors.
Mr Cornick added: “It is very important for us to champion businesses that put in great effort to help people access justice, it’s the core of what we do. With this investment and future expansion into Europe we are committed to bridging the gap between individuals and their right to legal resource. We’re hoping to keep growing the company and continue our mission to break down barriers to justice across the globe.”
Earlier this month, the UK government announced that it would introduce legislation to protect litigation funding by reversing the impact of the Supreme Court’s decision in PACCAR. Whilst it was uncertain at the time of the announcement how quickly the government would move forward with these plans, we have now seen that no time has been wasted to introduce simple legislation to Parliament.Earlier this week, the Litigation Funding Agreements (Enforceability) Bill 2024 was introduced in the House of Lords, delivering on the government’s promise to roll out new legislation to reverse the effects of the Supreme Court’s PACCAR ruling. HL Bill 56, ‘a Bill to amend section 58AA of the Courts and Legal Services Act 1990 to make provision about the enforceability of litigation funding agreements’, was introduced by Lord Evans of Rainow on 19 March 2024.The text of the bill is succinct and only makes two amendments to subsection (3) of section 58AA of the Courts and Legal Services Act, with the first being to insert the following text after paragraph (a): “an agreement is not a damages-based agreement if or to the 5 extent that it is a litigation funding agreement.” The second amendment, which is to be inserted after subsection (3), provides a straightforward definition of a litigation funding agreement with regards to the roles of the funder and the litigant within such agreements. The bill states that these amendments ‘are treated as always having had effect.’ The second section of the draft legislation also clarifies that this act applies solely to England and Wales, and that it ‘comes into force on the day on which it is passed.’The bill was introduced on 19 March and had its first reading in the House of Lords, and according to the UK Parliament website, it now has a second reading scheduled for 15 April 2024. The second reading of the bill allows for a general debate on the details of the bill.
Ziad Mouallem is the Founder & Operator of Practiclaim. Ziad is a Legal Entrepreneur, International Dispute Resolution Specialist, and Legal Innovator & Strategist, with a specific experience in Litigation Finance, Arbitration, ISDS, Enforcement, ADRs, ClaimTech, Legal Systems Design & Engineering, Legal Ops & Products Advisory, and Claim Management & Strategy.
Company Name and Description: Practiclaim
Practiclaim is a multidisciplinary Alternative Legal Claims Service Provider (ALCSP), offering comprehensive end-to-end solutions on a mandate-led basis.
We act as a claims incubator, aiding companies, their in-house functions, claim funders and service providers in efficiently sourcing, managing, optimizing, and realizing legal claims, with a particular focus on international arbitration, cross-border, and multi-jurisdictional business disputes.
Our services include cost-efficient Enterprise Legal Services (ELS) and Legal Process Outsourcing (LPO), ranging from free initial prevention and assessment, through optimized multi-sourced due diligence, to flexible-value-based-fee legal representation, enforcement, and financing/monetization options.
Area of Focus: Claim and dispute management and advisory, claim due diligence, pre-contentious risk management, legal representation support, international arbitration, ISDS, complex litigation, cross-border disputes, enforcement, recovery, international law, dispute resolution, early case assessment, legal tech, claim tech, justice tech, enterprise legal process outsourcing, legal help, claim value maximization, corporate & consumer access to justice, expert in-house support, legal claims solutions, managed legal services, value-driven fee optimization, decentralized justice, know your claim, team aggregation & resources allocation, legal procurement solutions.
Member Quote: "In the dynamic realm of legal claims and dispute resolution, funding solutions serve as the linchpin for ensuring access to justice for corporations and consumers alike. Subject to ongoing economic market adjustments, they enhance accessibility, ensure equitable legal support, facilitate legal mobility for claims, and evolve further into merged service offerings within claim service providers. These endeavors collectively reinforce the foundation of a genuinely just society."
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