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How Our Top-5 Articles of 2021 Foretell What’s Coming in 2022

Litigation Finance has enjoyed another year of growth and innovation, as we enter a shocking third year of the COVID pandemic. New funds have arisen, affording more potential claimants an opportunity to experience their day in court. New entrants are emerging in the funding space, innovative investment opportunities are popping up in the form of ILOs on the blockchain, and prominent examples of the benefits of legal funding are arising with increasing frequency.

Each of our top-5 most popular articles in the last year illustrate an industry trend we think is worth keeping an eye on. These trends also offer clues as to what we can expect in the coming year.

Below are the top-5 articles from 2021: 

#5) Litigation Finance and Patent Litigation—Fast Friends

2021 Trend: One thing we’ve learned about third-party litigation funding is that once clients and plaintiffs get a taste of it, they recommend it highly. This leads to explosive growth in specific sectors.

In this contributed post, Slingshot Capital founder Ed Truant explains that in 2021, Patent and IP litigation went from a relatively uncommon investment to one that is highly sought out. Some of this can be attributed to the pandemic and the investor rush toward uncorrelated assets. But some of the popularity of IP litigation investment stems from the possibility of awards in the multi-millions. As funders sharpen their due diligence skills and use new tech to predict case outcomes, the likelihood of sourcing meritorious patent cases grows.

From the article: “It used to be the case that patent litigation was viewed negatively by the litigation funding community…Then about two years ago, I noticed an increase in the number of patent cases being brought to the attention of funders, and in the number of funders marketing that they are interested in providing financing to patent cases.”

What does this mean for 2022?

If/when COVID restrictions are lifted and life slowly returns to normal, we’ll likely see similar growth in other sectors. We know that when law firms and clients have a good experience with funders, word gets around. The expectation is that Litigation Finance will improve in recognition and accessibility. As a largely self-regulating industry, third-party legal funding continues to position itself as a public good. We have every reason to believe that will continue in 2022

#4) Litigation Finance Basics

2021 Trend: The popularity of this article, originally published in 2017, reveals interesting things about the business of legal funding. Legal professionals and many types of investors are taking an increased interest in litigation funding. It also underscores that this widespread curiosity about the industry is leading people to investigate it from its humble beginnings to its current role as a public good.

From the article: “We don’t all have the same access to the legal system. Those with money have more access than those without. Litigation finance allows claimants without money to have the kind of access to justice that those with money currently enjoy. Obviously, that threatens some, but for the rest of us, litigation finance should be celebrated as a means of achieving equality of opportunity when it comes to preserving our legal rights.”

What does this mean for 2022?

We predict more of the same, probably on an even grander scale. As regulations become more welcoming to funders, investors are taking greater notice of the practice. Now that regulations are relaxing around non-lawyer ownership of legal firms, the potential for lawyer/funder co-ownership of firms has earned the interest of many prominent investment firms.

Jurisdictions around the world are relaxing champerty and maintenance restrictions and creating an environment more welcoming to third-party funding for an array of legal matters. This includes arbitration, patent and IP litigation, and claims enforcement.

The popularity of a back-to-basics piece like this one, demonstrates that more people in more industries are curious about what litigation funding can do for them.

#3) The Impressive Growth of Commercial Litigation Finance

2021 Trend: Our third entry is another Ed Truant piece illustrating an interest in Litigation Finance from people outside the legal field. In this piece, however, emphasis is placed on the addressable market for litigation funding. This tells us that financial experts are looking toward third-party funding as a future investment.

From the article: “I think it is important for all stakeholders to understand the size of an industry, so investors can determine whether it has the scale and growth attributes necessary to justify a long-term approach to investing in the sector.”

What does this mean for 2022?

We predict that hedge funds and private equity firms will continue to flock to the litigation funding sector. This may happen at an even faster clip, as certain types of litigation rise to prominence in the coming year. Breach of contract, insurance litigation, and issues of employer responsibility as related to COVID precautions are expected to flood court dockets in 2022. This amid an effort to catch up on the backlog of cases caused by court delays and closures. 

More litigation means more opportunity for investors to avail themselves of the benefits of TPLF as an uncorrelated asset.

#2) Investor Caveats in the Commercial LitFin Asset Class

2021 Trend: As an increasing number of investors seek out litigation funding, the pitfalls associated with this type of investment aren’t as well known. Ed Truant of Slingshot Capital, shows up again on our list, as he explains how investors can better understand this asset class.

Matters of tail risk, gross vs net returns, portfolio valuation, and deployment risks are all areas investors will want to be familiar with. After all, just because an asset is uncorrelated, does not mean it is free from risk.

From the article: “The asset class presents a unique opportunity to add an asset that has true non-correlation, along with inherent ESG attributes. This makes litigation finance a very attractive asset class. However, an investor needs to do their homework prior to executing an investment.” 

What does this mean for 2022?

The emphasis on ESG investing bodes well for the future. Litigation Finance’s commitment to investing in environmental, social justice, and governance litigation shines a light on the fact that LitFin investments can be simultaneously lucrative, and a net gain for society.

#1) Bank Cartel Claims Europe Announces $12 Million Funding Round

2021 Trend: The popularity of this article is an affirmation of the growth and expansion of Litigation Finance in the EU market. The piece details three antitrust cases in which the fund will deploy cash. The banks are accused of engaging in cartel behavior—one of the most serious types of antitrust charges.

This type of piece serves to illustrate how litigation funding helps fight corruption and works toward the public good. It also shows us that fundraising capital is out there for experienced funders with proven track records.

From the article: “In these three cases, for example, the pension and hedge funds that lost millions of dollars…can effectively claim their damages through actions before a national court. …in most cases, the remaining question to be decided is the amount of damages. This makes antitrust litigation very attractive for investors.”

What does this mean for 2022?

We think this means even greater global expansion for Litigation Finance. While funding still has its naysayers, the global mood toward third-party legal funding is largely positive. As the practice casts a progressively wider net—most of those who have used litigation funding to pursue their litigation report being satisfied with the results.

Legal funding is already growing in India, Singapore, Germany, South Africa, and China. There’s no reason to think expansion of the industry will not continue in 2022.

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Commercial Regulatory Issues

Burford Capital CEO: Government Inaction on PACCAR is Harming London Market

By Harry Moran |

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.”

Commercial Deals

Insurance CEO Ceases Trading with Firms Linked to Litigation Finance

By Harry Moran |

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”.  

Commercial Regulatory Issues

Bell Gully Report: New Zealand Courts are “Enablers of Litigation Funding”

By Harry Moran |

Following a 2022 report from New Zealand’s Law Commission, there has been a distinct lack of action by successive governments to introduce a Class Actions Act or any forms of oversight for the use of third-party funding in large group claims.

A new report released by Bell Gully looks at the current state of class actions in New Zealand, examining the rise of large group claims  and the role of litigation funding as a key driver. In ‘The Big Picture: Class Actions’, Bell Gully says that “in the past five years class actions have moved from being a threat on the horizon to a regular feature in New Zealand’s courts”. 

The introduction to the report appears to paint litigation funders as the prime moving force behind this trend, saying that the swell in class actions is “being driven by the availability of third-party litigation funding rather than a groundswell of consumer action.” Identifying the most prominent funders at work in New Zealand, Bell Gully points to LPF Group as the dominant local funder, Omni Bridgeway for its strong market reach from Australia, and Harbour for its global strength across litigation and arbitration funding. 

Without any legislative measures regulating funding and with no established industry association like Australia’s AALF, Bell Gully highlights the courts as the main mechanism of control over funding activity. The report goes further and suggests that “funder-friendly court decisions have contributed to the growing influence of litigation funders in New Zealand”, noting the admission of opt-out class actions and courts’ willingness to make common fund orders.

In its review of the need for a Class Actions Act in New Zealand, Bell Gully argues that the current lack of oversight on funding has led to a situation where the courts are acting as “enablers of litigation funding” rather than regulators of the practice.

The full report can be accessed here.