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Recent Developments in Litigation Finance (Part 2 of 2)

By Mauritius Nagelmueller

This article aims to provide an overview of the most significant recent developments in the litigation finance industry. Part 2 of this 2-part series discusses the rapid growth of litigation finance across the globe, as well as its multi-dimensional expansion into diverse markets. If you’d like to reference Part 1 of this series, you can find it here.

Growth

The most significant overall trend in litigation finance is simply put: growth – a vibrant and ongoing increase in the use and acceptance of the industry. Litigation finance has emerged from a promising niche into a mainstream alternative asset class. The use has multiplied in the recent years, and among many other characteristic features, investors are attracted by the chance to diversify their portfolios with uncorrelated assets. The demand in the legal world is still much higher than the supply of litigation finance – an indicator that normally only the best cases are receiving financing. By now, the business spans the financing of both plaintiffs and defendants, single cases and portfolios, at practically every stage of the dispute, for example also at the enforcement phase.

As litigation finance has become a multi-billion-dollar business, surveys and reports by universities and journals, as well as financing providers point to its continued growth, with no signs of stopping any time soon. While detailed data grows increasingly available, it is hard for reporters or councils to keep pace with the industry, which continues to evolve before initial research can proffer valid conclusions.

While this powerful forward movement promotes access to justice in the eyes of many, the impact on the civil justice system concerns others. Calls for more rules and regulation regarding inter alia, disclosure and conflicts of interest remain loud. Whichever side one chooses, the market for this service is growing, the demand enormous, and high-quality cases tend to find high-quality finance providers.

Expansion

For all the reasons stated above, as well as in the Part 1 of this series, 2017 has been the year of expansion for litigation finance firms. New offices in multiple jurisdictions, new funds that are larger or have innovative structures, and broader services providing the full spectrum of finance and risk management related to legal disputes.

A wave of new office launches took place in multiple directions internationally. Litigation finance firms from the U.K. entered the U.S. market, and are eager to establish their business in New York City, Washington D.C., Philadelphia, California, and a number of other locales across the U.S. Strategic recruiting, e.g. of former U.S. judges and biglaw partners, builds strong teams in a constantly growing environment, and makes a career in litigation finance a more and more attractive option.

Following the developments in Asia described previously, litigation finance firms have opened their first offices in Singapore. The market is also growing in Canada, where local courts have increasingly embraced litigation finance for the past 15 years. International litigation finance and insurance firms seem attracted, and have ventured into Canada this year.

And funds are growing bigger accordingly. The largest players have billions of dollars committed to the legal market, able to invest hundreds of millions in a short period of time. The biggest single litigation investment fund in North America has been raised this year, at $500 million. An increase in size is not the only development, however, since crowdfunding and innovative online platforms play a progressively important role, opening the market to an even broader range of participants.

Litigation finance has never been one-dimensional, but has included tailored financing concepts and related services like asset tracing for some time. The progress of portfolio financing shapes the market thoroughly. More recently, the range of available insurance options has developed in the U.S., bringing a new variety of sophisticated services, such as contingency fee insurance and attorney fee insurance solutions which can offer a cheaper hedge compared to financing.

All in all, it will be fascinating to watch how things play out in the years ahead. Whatever the outcome, 2017 will certainly be remembered as a transformative year for the nascent industry of litigation finance.

 

Mauritius Nagelmueller has been involved in the litigation finance industry for more than 10 years.

This 2-part article is for general information purposes only and does not purport to represent legal advice. The views and opinions expressed are those of the author and do not necessarily reflect the position of his employer. No reader should act or refrain from acting on the basis of any information related to this 2-part article without seeking the appropriate advice from a lawyer licensed in the recipient’s jurisdiction.

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Case Developments Commercial

Sony and Apple Challenge Enforceability of Litigation Funding Models

By John Freund |

A pivotal UK court case could reshape the future of litigation finance agreements, as Sony and Apple reignite legal challenges to widely used third-party funding models in large-scale commercial disputes.

An article in Law360 reports that the two tech giants are questioning the validity of litigation funding arrangements tied to multibillion-pound cartel claims brought against them. Their core argument: that certain litigation funding agreements may run afoul of UK laws governing damages-based agreements (DBAs), which restrict the share of damages a representative may take as remuneration. A previous Court of Appeal decision in PACCAR Inc. v. Competition Appeal Tribunal held that some funding models might qualify as DBAs, rendering them unenforceable if they fail to comply with statutory rules.

This resurrected dispute centers on claims brought by class representatives against Apple and Sony over alleged anti-competitive behavior. The companies argue that if the funding arrangements breach DBA regulations, the entire claims may be invalidated. For the litigation funding industry, the outcome could severely curtail access to justice mechanisms in the UK—especially for collective actions in competition law, where third-party financing is often essential.

The UK’s Competition Appeal Tribunal previously stayed the proceedings pending clarity on the legal standing of such funding arrangements. With the dispute now heading back to court, all eyes will be on whether the judiciary draws a clear line around the enforceability of funder agreements under current law.

The decision could force funders to rework deal structures or risk losing enforceability altogether. As UK courts revisit the DBA implications for litigation finance, the sector faces heightened uncertainty over regulatory compliance, enforceability, and long-term viability in complex group litigation. Will this lead to a redefinition of permissible funding models—or to a call for legislative reform to protect access to collective redress?

Case Developments Commercial

Funder’s Interference in Texas Fee Dispute Rejected by Appeals Court

By Harry Moran |

A Texas appeals court has ruled that a litigation funder cannot block attorneys from pursuing a fee dispute following a remand order, reinforcing the limited standing of funders in fee-shifting battles. In a 2-1 decision, the First Court of Appeals found that the funder’s interest in the outcome, while financial, did not confer the legal authority necessary to participate in the dispute or enforce a side agreement aimed at halting the proceedings.

An article in Law360 details the underlying case, which stems from a contentious attorney fee battle following a remand to state court. The litigation funder, asserting contractual rights tied to a funding agreement, attempted to intervene and stop the fee litigation between plaintiffs' and defense counsel. But the appellate court sided with the trial court’s decision to proceed, emphasizing that only parties directly involved in the underlying legal work—and not third-party financiers—are entitled to challenge or control post-remand fee determinations. The majority opinion concluded that the funder’s contract could not supersede procedural law governing who may participate in such disputes.

In dissent, one justice argued that the funder’s financial interest merited consideration, suggesting that a more expansive view of standing could be warranted. But the majority held firm, stating that expanding standing would invite unwanted complexity and undermine judicial efficiency.

This decision sends a strong signal to funders operating in Texas: fee rights must be contractually precise and procedurally valid. As more funders build fee recovery provisions into their agreements, questions linger about how far those rights can extend—especially in jurisdictions hesitant to allow funders a seat at the litigation table.

Commercial Regulatory Issues

Oklahoma Moves to Restrict Foreign Litigation Funding, Cap Damages

By John Freund |

In a significant policy shift, Oklahoma has enacted legislation targeting foreign influence in its judicial system through third-party litigation funding. Signed into law by Governor Kevin Stitt, the two-pronged legislation not only prohibits foreign entities from funding lawsuits in the state but also imposes a $500,000 cap on non-economic damages in civil cases—excluding exceptions such as wrongful death. The new laws take effect November 1, 2025.

An article in The Journal Record notes that proponents of the legislation, including the Oklahoma Civil Justice Council and key Republican lawmakers, argue these measures are necessary to preserve the integrity of the state's courts and protect domestic businesses from what they view as undue interference. The foreign funding restriction applies to entities from countries identified as foreign adversaries by federal standards, including China and Russia.

Critics, however, contend that the laws may undermine access to justice, especially in complex or high-cost litigation where third-party funding can serve as a vital resource. The cap on non-economic damages, in particular, has drawn concern from trial lawyers who argue it may disproportionately impact vulnerable plaintiffs without sufficient financial means.

Oklahoma’s move aligns with a broader national trend of state-level scrutiny over third-party litigation funding. Lawmakers in several states have introduced or passed legislation to increase transparency, impose registration requirements, or limit funding sources.

For the legal funding industry, the Oklahoma law raises pressing questions about how funders will adapt to an increasingly fragmented regulatory landscape. It also underscores the growing political sensitivity around foreign capital in civil litigation—a trend that could prompt further regulatory action across other jurisdictions.