Last month’s announcement by Burford Capital Limited that it would provide $45 million in litigation financing to an FTSE 20 company, namely British Telecom, signals a significant change in the market. It also provides more evidence of an evolving landscape in the world of litigation finance. Within the same month, Augusta announced that it would fund pre-proceedings costs to allow claimants to determine the merits of an action.
Why is this deal with British Telecom so significant?
It marks a watershed moment confirming more broadly what many of us have acknowledged for years: that litigation is an asset or liability like just about any other property. Companies are used to dealing with most forms of property and how to use financing to maximize or minimize risk associated with them for the financial wellbeing of the corporation and its stakeholders. Litigation is now a more recognized, analyzed and quantified piece of property than it has ever been in the past.
Some say these changes have been slow to happen. Why do you think we’re seeing them now? What’s changed?
The legal market and in particular many lawyers are conservative. Assessing litigation and providing some certainty is a difficult business. However, the skills of financial analysis, underwriting and investment banking are now being applied to litigation and the business of law more than ever in the past. To the extent lawyers and law firms are not pursuing alternative ways to deal with litigation beyond the historical model, clients and business men and women are.
Why has litigation funding been viewed as less suitable for commercial litigation than for consumer group action or individual claims?
Big law wants to act for big business, act in big cases and get paid big fees. This model works until big business starts to balk at the big fee part and or looks for a more creative way to deal with the asset or liability that is litigation.
Is this foray into the commercial market a good thing? Why or why not?
Good or bad it is here to stay. It will create greater access to litigation, level the playing field in more big claims and more openly be addressed by the courts. As the market becomes more mature it will make litigation finance more accessible, common place and transparent.
If this move does indeed signal an evolving marketplace, could it potentially have a negative impact on what has been the traditional market for litigation funding – victims without deep pockets to pursue and stay the course in a legal battle?
Anything that expands and deepens the market will create more and different opportunities for law firms and their clients.
What impact could the move by August have on the marketplace, and on the future of litigation? Could funding pre-proceedings costs potentially be a cost savings for companies who choose this route, and ultimately be helpful to victims who may secure a quicker settlement?
The more front end loaded a case the clearer the merits are for both plaintiffs and defendants. This is a positive development and may get the parties to a determination faster.
This article was originally published by ICC FraudNet.