New research shows continued growth of litigation finance

Since 2012, Burford Capital has invested in research to better understand the litigation finance market. Up-to-date insights help us be nimble and responsive partners and provide solutions tailored to our clients’ needs.

From the beginning, the data have shown the increased use of litigation finance, while at the same time highlighting that there is significantly more opportunity for law firms and their clients to benefit from it. The 2017 survey continues the trend.

Litigation finance defined

Litigation finance (also called litigation funding, legal finance, or third-party funding) generally refers to a process by which a litigant or law firm uses the asset value of commercial litigation or arbitration to secure capital from a third party, either to finance the litigation or for other business purposes. Financing consists of a variety of models and approaches, and most transactions occur on a non-recourse basis—meaning that the finance provider loses its investment if the underlying claim or case is lost.  

Clients and law firms are under pressure

According to the research, clients’ top three business challenges are:

              1. Need new ways of financing litigation and other legal costs

              2. Managing legal risk and uncertainty

              3. Increased pressure on legal budgets, staffing and spending

Law firms’ top three business challenges are:

1. Pressure to be more competitive in bringing in new business

              2. Increased client pressure on legal budgets, staffing and spending

              3. Need for innovation to remain competitive  

Litigation finance solves business challenges

72% of respondents agree that litigation finance is a growing and increasingly important area in the business of law—and the research shows that clients and firms are using it to solve business challenges.

Top 3 ways clients and lawyers use litigation finance:

             1. Pursue claims that will bring value to the business

             2. Bring or sustain proceedings regardless of cash position

             3. Invest in growth and use capital efficiently  

Research shows dramatic growth of litigation finance

Among US law firms, compared to earlier studies, use has increased by 28% since 2016 and 414% since 2013.

 

Snapshot: Litigation finance in the US

  • Almost eight in ten (78%) of US lawyers say they are aware of litigation finance
  • Half (50%) of US lawyers who haven’t yet used litigation finance expect to do so within two years
  • US respondents are much more likely to cite competitive concerns as a trigger for using litigation finance

Snapshot: Litigation finance in the UK

  • Over eight in ten (81%) of UK lawyers say they are aware of litigation finance
  • Over half (54%) of UK lawyers who haven’t yet used litigation finance expect to do so within two years
  • UK respondents are most likely to agree that the more law firms innovate how they finance their firms, the more nimble they will be in serving clients

Snapshot: Litigation finance in Australia

  • Over eight in ten (85%) of Australian lawyers say they are aware of litigation finance
  • Over half (55%) of Australian lawyers who haven’t yet used litigation finance expect to do so within two years
  • Respondents in Australia are significantly more likely to cite preserving cash and investing in growth as triggers for using litigation finance

Download the full report here