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Early-Stage Funding (ESF): Bridging the Gap in Litigation Finance

By Drew Hathaway |

The following was contributed by Drew Hathaway, Founding Partner of Ignitis

Litigation funding has become a powerful tool for leveling the playing field in legal disputes, particularly in large-scale collective redress and mass litigation. However, traditional litigation funding models generally focus on established claims, leaving many meritorious cases stranded without the resources to move forward. ESF changes that dynamic, ensuring that strong claims don’t fail due to a lack of early investment.

What is Early-Stage Funding (ESF)?

ESF is a litigation seed funding model designed to provide capital before a case is mature enough for traditional funders. Unlike standard litigation finance, which typically invests after a case has been filed and is well-developed, ESF supports cases at their most critical early phase—covering investigation, legal groundwork, expert reports, and strategic planning.

For many high-stakes claims this early-stage investment is the difference between a case moving forward or being abandoned due to financial constraints.

How Can ESF Be Used?

ESF can be used in various ways. Some examples are:

  • Case Investigation & Viability Assessments: Financing expert reports, forensic analysis, and economic modeling to strengthen claims.
  • Initial Legal Work: Supporting law firms in preparing legal arguments, securing lead claimants, and initiating regulatory engagement.
  • Claimant Outreach & Bookbuilding: Funding the early-stage efforts to build a robust claimant pool in opt-in and opt-out actions.
  • Litigation Structuring & Strategy: Ensuring that the case is structured in a way that will later attract traditional (Round B) litigation funders.

Who Benefits from ESF?

ESF benefits injured parties, law firms, and traditional litigation funders in the following ways:

Claimants: Claimants generally do not have the means to finance their own litigation. For individuals or businesses harmed by corporate misconduct, access to ESF means:

  • Non-recourse capital to get the claim off the ground (meaning the ESF only needs to be paid back if the case is fully funded). 
  • The case moves forward faster, without waiting for full-scale funding.
  • Access to top-tier legal representation capable of success against well-resourced defendants.
  • The claims are properly developed and strategically executed, increasing their chances of success.

Law Firms: Law firms working on large-scale litigation often struggle with taking on the full risk and high costs of early-stage case development. This stage generally takes significant work, bookended with long timelines to securing Round B funding before capital begins to be deployed. For law firms, access to ESF means:

  • They have immediate access to capital to help with law firm cash flows.
  • They no longer must take on full risk for their time and upfront resources needed to secure funding.
  • They can focus their attention on developing the best legal arguments possible rather than worrying about their up-front time commitment.
  • They have a better developed case to present to Round B funders, making it more efficient to secure full funding.

Round B Funders (Traditional Litigation Funders): Frequently Round B Funders are presented with cases that they believe are simply too early for investment. Traditional litigation funders benefit from ESF because:

  • They receive well-developed cases that have already passed viability assessments.
  • They have immediate access to expert reports and legal opinions to better analyze the case and risks.
  • The risk of investment is reduced, since much of the groundwork has been completed and expert opinions are available.
  • Their duration risk is significantly reduced because ESF has been deployed to jump start the case and litigation is ready to commence. 

Conclusion

As litigation finance evolves, ESF is emerging as an essential tool for claimants, law firms and funders alike. By enabling early-stage legal work and de-risking high-potential claims, ESF ensures that justice is not delayed or denied due to financial constraints.

If you are exploring funding options for an early-stage case, ESF could be the solution to unlocking its full potential. 

About the Author

Drew Hathaway is a Founding Partner of Ignitis, where he leads case development, business strategy, and litigation funding initiatives. A U.S.-trained class action lawyer, Drew brings nearly two decades of experience navigating complex, high-stakes disputes and has built a reputation for advancing impactful litigation across borders.

After beginning his career defending medical malpractice cases, Drew transitioned to the plaintiff side in 2016, where he later became a key figure in the growth of international collective redress. He played a central role in launching and scaling European collective actions, helping to secure and deploy over €100 million in funding for cases aimed at holding multinational corporations accountable. Drew has helped millions of Europeans gain access to justice.

Drew’s expertise spans the full lifecycle of cross-border collective litigation—from claim foundation setup and funding structures to jurisdictional strategy, cost and tax modeling, and claims management. His comparative knowledge of U.S. and European systems allows him to operate effectively at the intersection of law and finance, where he regularly collaborates with leading law firms, economists, litigation funders, and academic experts.

He is a frequent speaker on international collective redress and litigation finance and is deeply committed to expanding access to justice for individuals and consumers harmed by systemic corporate misconduct.

He earned his B.A. from the University of North Carolina at Chapel Hill and his J.D. from Campbell University School of Law, where he was a National Moot Court Team member, Order of Old Kivett inductee, and editor of the Campbell Law Observer.

Drew is admitted to practice law in North Carolina, multiple U.S. federal and appellate courts, and in England and Wales.

About the author

Drew Hathaway

Drew Hathaway

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Commercial Regulatory Issues

Calunius Capital’s Perrin Blasts New Attacks on UK Litigation Funding

By John Freund |

Third-party funders are once again in the cross-hairs—and one of the sector’s elder statesmen is firing back. In a forthright essay published today, Calunius Capital chairman Leslie Perrin argues that Britain’s collective redress regime “cannot survive” if fresh assaults on funder fees succeed.

In an article in Solicitors Journal, Perrin points to two flashpoints: the UK Supreme Court’s 2023 PACCAR ruling, which invalidated percentage-based funding agreements, and a new bid in Neill v Sony to outlaw multiples-based returns as well. At the same time, the Competition Appeal Tribunal is facing a judicial-review challenge from funder Innsworth over its decision to slash the funder’s recovery in the landmark £200 million Merricks v Mastercard settlement—an intervention Perrin calls “dangerously simplistic.”

Perrin’s broader thesis is that without well-capitalised funders prepared to shoulder adverse-costs risk, consumers will be left “stranded” against well-resourced corporate defendants and the CAT’s promise of affordable group litigation will wither. Perrin also takes aim at lobbying by the U.S. Chamber of Commerce, which he says seeks to “promote opposition to litigation funding” under the guise of economic prudence. In place of curbs, he backs the Civil Justice Council’s recommendation for legislation reversing PACCAR retrospectively and prospectively.

If Westminster heeds those warnings, UK funders could regain certainty and renew their commitment to competition-class actions. But if further fee-caps or invalidations emerge, capital will flee to jurisdictions with clearer rules—leaving an access-to-justice gap just as collective-action appetite is peaking. Whether Innsworth’s challenge succeeds may therefore set the tone for the next chapter of UK litigation finance.

Commercial Regulatory Issues

Hausfeld leader rebuts ‘£18bn mass-litigation burden’ claim

By John Freund |

Alarm bells over the economic cost of UK class actions are “simply wrong,” says Anthony Maton, global co-chair of claimant firm Hausfeld, who dismantles a think-tank report suggesting mass litigation could sap £18 billion from the economy.

In The Global Legal Post, Maton traces the deliberate parliamentary design behind the Consumer Rights Act 2015 and the CAT’s rigorous gatekeeping of collective proceedings. He argues that funders—often caricatured as “ambulance chasers”—perform an essential market-correction role, underwriting meritorious competition claims that regulators or individual consumers lack resources to pursue. The piece notes that voluntary redress schemes built into the Act “have been used precisely zero times,” reinforcing the need for well-financed private enforcement.

Maton also rebuts suggestions that funders extract disproportionate value, pointing to oversight mechanisms and adverse-costs exposure that align investor and claimant interests. He invites sceptics to consider whether ill-gotten profits are better left with infringing corporates or redistributed to harmed consumers and access-to-justice charities.

The commentary offers a timely counter-narrative as Westminster considers PACCAR-related reforms. By reframing funders as pillars of a competitive economy rather than rent-seekers, it may bolster lobbying for statutory clarity on LFAs and head off calls for US-style disclosure mandates. Expect industry groups to amplify this message—and for critics to sharpen economic-impact modeling—in the run-up to any government consultation.

Case Developments Commercial

Paris Court Sets December Date for Ruling on Sulu Funded Award Annulment

By John Freund |

A critical procedural milestone has been set in the high-profile dispute over the $15 billion arbitral award claimed by the heirs of the defunct Sulu sultanate against Malaysia. A Paris court has scheduled a hearing for December 9, where it will decide whether to annul the partial award issued by a Spanish arbitrator—a decision with potentially far-reaching implications for the legitimacy of third-party funded arbitration in sovereign disputes.

As reported by The Malaysian Reserve, the case stems from a 2022 ruling which found Malaysia liable for ceasing annual payments related to a 19th-century lease of territory now part of Sabah. The award has been described as one of the largest in arbitration history and is backed by Therium, a UK-based litigation funder. Malaysia has consistently challenged the legitimacy of the proceedings, resulting in conflicting decisions in courts across Spain, France, and Luxembourg.

The upcoming Paris ruling will not address the full $15 billion award but rather the validity of the partial award that formed the foundation for the final judgment. Malaysia’s legal representatives argue that the arbitration itself is void, citing breaches in due process and the arbitrator's alleged overreach.

The Sulu case has become a lightning rod in debates over state immunity, the enforceability of investor-state arbitration, and the role of third-party funders in politically sensitive disputes. As funders continue to back complex claims against sovereign states, the Paris court’s decision may set a significant precedent for the enforceability—and reversibility—of arbitral awards financed by external capital.