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Litigation Finance is Cheaper Than You Might Think!

Litigation Finance is Cheaper Than You Might Think!

The following was contributed by Matthew Pitchers, Head of Investment Valuation at Augusta Ventures I was in conversation the other day with a prospective user of our finance – a law firm who will remain nameless. The conversation was going well, very well in fact, until those seven words came up: “what is it going to cost me?”. I replied that our fee would be based on the higher of a multiple on the funds deployed or a set percentage of damages awarded. After a few seconds of silence which felt like an eternity, the response I got back was “that is very expensive, and I don’t think my client will go for it”. This left me bemused because whilst there is a general misconception that litigation funding is expensive, when compared to other sources of secured and unsecured funding available on the market, it is in fact very competitive and sometimes even cheap. This left me thinking about how best to explain this to the enquirer at the other end of the phone who would be left explaining all available options to his client. What is litigation funding? What I wanted to say was: Sir, in considering how expensive litigation funding is, one needs to first analyse what litigation funding is. This is easier to think about when considering what litigation isn’t. It isn’t a traditional debt product. There are no guaranteed cash flows. There is no obligation on the user of the debt to repay it. Any returns that the funder makes are payable from what the defendant pays if the claim is successful, not from the finance user. Furthermore, the entire financial risk of the case is transferred to the funder, and if a case loses, the risk of adverse costs falls to the funder and not the claimant. Therefore, an amount invested upfront in a legal case in order to share in the same risks and rewards as the claimant, feels more akin to a purchase of an equity participation in a start-up than a one-step-removed loan. To put it another way: If you were going on Dragon’s Den and your great idea was to ask the Dragons for an upfront investment in a legal case for a future share of any available returns which may or may not occur, how much of the case do you think the Dragons would want? What the market says In haggling over the value of your idea, the Dragons would probably consider the availability of unsecured loans, and the returns expected from venture capital start-up funding. If you, as an individual, were to go into the market today and look for an unsecured loan you might find APR’s that range from 10.3% per annum, for those people with excellent credit scores, up to 32.0% per annum for those with poor credit scores, and that is only on amounts up to £25,000. A good benchmark for the percentage of cases a litigation fund might win, despite all the due diligence that is performed, is around 70%. Loaning out money with only a 70% chance of getting any of it back is not similar to loaning money to a person with an excellent credit score, so litigation funders are firmly in poor credit score territory, where an APR could typically be between 28.5% and 32.0%. And remember, that is only on amounts up to £25,000, an investment in a legal case more-often-than-not, is many multiples of this size. A such, the IRR that the funder aims for is more akin to those expected by venture capitalists, who might typically look for 30-40% annual returns on a start-up investment. The tenor of investments A classical case tenor for litigation funding is usually two to four years. In the interim period the funder will have not received any payments. Their risk exposure goes up over time as more money is deployed as the legal case progresses, and there is limited availability to claw back any investment if the case looks like it isn’t going to win. It is, to all intents and purposes, an investment with a binary outcome and once invested there is no going back. An investment with an annualised return of 40% over three years would expect to achieve a 2.74X money multiple for the investor at the end of the life of the investment. Over four years the money multiple would be expected to be 3.84X. This would be at the upper end of what a litigation funder might achieve. A normal equity investment in a company has fewer downsides regarding the capital locked up, as covenants would be in place to claw back any investments if the company were mismanaged in the interim period. Summary In short, litigation funders are able to make worthwhile returns through rigorous diligence, investing in  cases that they expect to win and which meet their internal criteria, whilst building up a large enough portfolio that the effect of the unsystematic binary risk of losing an individual case is diluted. In return, a competent litigation funder should expect to achieve on their portfolio a rate of return that is better than a correlated investment, but lower than that achieved in the start-up markets. A claimant, in using litigation finance, should expect all their costs to be covered, and any risk of adverse costs to be transferred to the funder. In effect it becomes a risk-free investment for the claimant, whilst they still take the larger share of any return. This would be the dream scenario for any owner of a start-up company, selling a small stake in the company and removing all future down-side risk to themselves, whilst removing the burden of future costs. In summary Sir, this is a great opportunity for your client and it is highly competitive. Instead, I said to the man on the other end of the phone: ‘I’m sorry yes, it does sound expensive, let me see what we can do’.
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Burford’s Q2 Profits Surge on New Capital

By John Freund |

Burford Capital has delivered its strongest quarterly performance in two years, buoyed by a swelling pipeline of high-value disputes and a fresh infusion of investor cash.

A press release in PR Newswire reveals that the New York- and London-listed funder more than doubled revenue and profitability in the three months to 30 June 2025. CEO Christopher Bogart credited “very substantial levels of new business” for the uptick, noting that demand for non-recourse financing remains “as strong as we’ve ever seen.”

The stellar quarter follows a lightning-quick, two-day debt offering in July that raised $500 million—capital Burford says will be deployed across a growing roster of commercial litigations, international arbitrations, and asset-recovery campaigns. Management also highlighted significant progress in portfolio rotations, underscoring the firm’s ability to monetise older positions while writing new ones at scale. Investors will get a deeper dive when Burford hosts its earnings call today at 9 a.m. EDT.

Burford’s results arrive amid heightened regulatory chatter in Washington and Westminster, yet the numbers suggest the industry’s largest player is unfazed—for now—by talk of disclosure mandates and tax levies. The firm emphasised that its legal-finance, risk-management and asset-recovery businesses remain uncorrelated to broader markets, a pitch that continues to resonate with pension funds and endowments hunting for alternative yield.

For litigation-finance insiders, Burford’s capital-raising prowess and improving margins could have ripple effects: rival funders may face stiffer competition for marquee cases, while law-firm partners might leverage the firm’s deeper pockets to negotiate richer portfolio deals.

Australian High Court Ruling Strengthens Class-Action Funders

By John Freund |

Australia’s litigation-funding industry just received the judicial certainty it has craved.

Clayton Utz reports that the High Court, in Kain v R&B Investments [2025] HCA 26, unanimously held that the Federal Court may impose common-fund orders (CFOs) or funding-equalisation orders at settlement or judgment—ensuring all class members, not just those who signed funding agreements, contribute to a funder’s commission.

The Court reaffirmed Brewster’s bar on early-stage CFOs but found late-stage CFOs fall within the “just” powers of ss 33V(2) and 33Z(1)(g) of the Federal Court Act. Crucially, the bench rejected “solicitor common-fund orders,” ruling that any CFO benefiting plaintiff firms would contravene the national ban on contingency fees outside Victoria.

For funders, the decision cements the enforceability of commissions in nationwide class actions and removes a major pricing risk that had lingered since Brewster. For plaintiff firms, however, the ruling slams the door on a hoped-for new revenue channel.

The Court’s reasoning—tying funding commissions to equitable cost-sharing rather than contingency returns—will likely embolden funders to back larger opt-out claims, knowing a CFO safety-net is available at settlement. Meanwhile, plaintiff firms may redouble lobbying efforts for contingency-fee reform, particularly in New South Wales and Queensland, to reclaim ground lost in today’s judgment. Whether lawmakers move on that front will shape Australia’s funding market in the years ahead.

Locke Capital Backs Sarama in US $120 Million ICSID Claim Against Burkina Faso

By John Freund |

A junior gold explorer is turning to third-party capital to fight what it calls the expropriation of a multi-million-ounce deposit.

According to a press release on ACCESS Newswire, ASX- and TSX-listed Sarama Resources has drawn down a four-year, US $4.4 million non-recourse facility from specialist funder Locke Capital II LLC. The proceeds will pay Boies Schiller Flexner’s fees and expert costs in Sarama’s arbitration against Burkina Faso at the International Centre for Settlement of Investment Disputes (ICSID).

Sarama alleges the government retroactively revoked its Tankoro 2 exploration permit in 2023, halting development of the flagship Sanutura project. An arbitral tribunal chaired by Prof. Albert Jan van den Berg held its first procedural hearing on 25 July; Sarama’s memorial is due 31 October, and the company is seeking no less than US $120 million in damages.

Under the Litigation Funding Agreement, Locke’s recourse is limited to arbitration proceeds and the ownership chain of Sanutura; Sarama’s other assets remain ring-fenced. Repayment occurs only on a successful award or settlement, with Locke’s return calculated on a multiple-of-invested-capital basis and adjusted for timing.

The deal underscores the continued appetite of specialist funders for investor-state claims, particularly in the mining sector where treaty protections offer a clear legal framework and potential nine-figure payouts.