Global Lawsuit Loans Market Report 2019

As we approach the beginning of summer, the litigation funding industry is growing impatient in waiting for the outcome of the Civil Justice Council’s (CJC) review of litigation funding, with funders anxious to see the government provide a solution to the uncertainty created by the Supreme Court’s ruling in PACCAR.

An article in The Law Society Gazette provides an overview of an interview with Christopher Bogart, CEO of Burford Capital; who spoke at length about the ongoing impact of the UK government’s failure to introduce legislation to solve issues created by the PACCAR ruling. Bogart highlighted the key correlation between funders’ reluctance to allocate more capital to the London legal market and “the government non-response” to find a quick and effective solution to PACCAR.

Comparing the similarities in effect of the government inaction over funding legislation to the Trump administration’s tariff policy, Bogart said simply, “markets and businesses don’t like such uncertainty.” He went on to describe the London market as “not as healthy as you would like it to be”, pointing to statistics showing a decrease in capital allocation and the examples of major funders like Therium making job cuts.

One particular pain point that Bogart pointed to was Burford’s newfound hesitancy to name London as an arbitral seat and choose English law for international contracts, saying that the company has moved those contracts to jurisdictions including Singapore, Paris or New York. Bogart said that it was “unfortunate because this is one of the major global centres for litigation and arbitration”, but argued that the strategic jurisdictional shift was a result of having “a less predictable dynamic here in this market”.

As for what Bogart would like to see from the upcoming CJC’s review of litigation funding, the Burford CEO emphasised the longstanding view of the funding industry that there is “no need for a big regulatory apparatus here.” Instead, Bogart suggested that an ideal outcome would be for the CJC to encourage Westminster “to restore a degree of predictability and stability into the market.”

The tensions between the insurance industry and litigation finance are well established, with insurance industry groups often at the forefront of lobbying efforts calling for tighter regulations of third-party funding. In one of the most significant examples of this tension, the CEO of a speciality insurance company has declared that his company will cease doing business with any firm that is linked to litigation funding activity.

An article in Insurance Business highlights recent comments made by Andrew Robinson, chairman and CEO of Skyward Specialty Insurance Group, where he said that the company would no longer do business with companies who have any ties to litigation finance. Citing the uptick in the use of third-party funding as one of the primary contributors to social inflation, increasing product costs and reduced availability; Robinson declared that Skyward are “not going to trade with anybody who's involved in this”.

According to the article, Robinson’s decision was triggered by the company’s discovery that an asset manager it worked with was involved in litigation funding. Skyward then “shut off” its business relationship with the asset manager and is in the process of redeeming any remaining assets with the firm. Robinson said that the idea of Skyward having ties to firms involved with litigation finance “is wrong at all levels”, saying that he told his executive leadership team that “we can’t have that anywhere near us”.

Aside from the asset manager, Skyward was trading with a company involved in contingent insurance whose work included litigation finance, but Robinson stated that the unnamed company is reducing its already minor presence in the funding space.

Despite targeting his ire primarily at litigation funding, Robinson suggested that the wider issue stems from a “broken” tort system and that “you have to get to the root cause and toward reform”.