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Commercial Finance

Expert Panel Discussion on Commercial Litigation Finance

September 16, 2014
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4min read

In the beginning of September 2014, we released an article about the state of plaintiff financing, citing a study commissioned by funding-giant Burford. Among the survey’s revelations were that startlingly few lawyers know plaintiff financing exists, but the industry is nonetheless expected to grow significantly.

On Sep 15, 2014, The Lawyer published a panel discussion between four seasoned attorneys. The topic? Commercial litigation finance. The participants?

  •        Robert Hickmott: partner at Quinn Emanuel Urquhart & Sullivan
  •        David Engel: partner at Addleshaw Goddard
  •        Jonathan Warne: partner at Nabarro
  •        Paul Cooklin: practice manager at 3 Verulam Buildings

The discussion covered a range of topics, but a few points spoke to questions we receive on a daily basis and thought we’d share our favorite selections.

Q: Why haven’t I heard of commercial litigation finance until now?

There are many reasons for the increased interest [in plaintiff financing], including the expansion of the funding market giving rise to greater publicity and more competitive terms. Therefore both law firms and clients now have a better understanding of the opportunities available.

-Jonathan Warne

Q: Is commercial litigation financing mostly used for frivolous lawsuits?

Whereas a few years ago funding may have been associated with cases brought by impecunious claimants (where the proceedings would never have been pursued otherwise), it is now considered as a viable option for almost any type of commercial dispute involving a sizeable damages claim.

-Jonathan Warne

Six years ago people were generally still afraid to address how helpful funders could be. Now with this funding, the door for access to justice has been opened and I think there is growing acknowledgment of that.

-Paul Cooklin

Q: What factors should I consider when seeking commercial litigation finance?      

Factors to consider include, inter alia, the reputation of the funder, its track record, its financial standing and the experience of its staff. Whether a funder is liable to meet an adverse costs order should be specified clearly in the contract and thought should be given to how to ensure those funds will be made available if they are required.

-Robert Hickmott

Q: Is plaintiff financing right for every case?

Litigation funding is perceived as a realistic funding option that should be considered seriously at the outset of each matter. For some cases, funding will not be viable and for others it will bring with it clear commercial benefits for clients and law firms.

-Jonathan Warne

We reached out to each of these attorneys with a few further questions; Paul Cooklin’s responses are below, as are Tom Dane’s on behalf of Jonathan Warne. We will continue updating as further responses come in.

Q: Does it surprise you how few people know about litigation funding?

PC: It does surprise me but the word is certainly spreading. We will see litigation funding discussed and considered more and more.

Tom Dane: Litigation funding remains a developing area and it will take time for lawyers and clients to become comfortable with using funding. In the UK, all solicitors should have a good understanding of litigation funding in order to comply with professional obligations requiring clients to be properly advised as to all available funding options. However, for clients, funding will not be suitable for all cases and even where funding might be a suitable option in principle, clients may prefer to fund the litigation themselves. Until clients use litigation funding on a case their level of experience/knowledge is likely to be limited.

Q: The practice seems to have taken off much quicker in the UK than in the US. To what do you attribute this?

PC: My own perception is that UK lawyers and their clients are now much more aware of the resource and option of funding, That was not the case only a few years ago. It might be that we shall see litigation funding considered more deeply in the USA as time goes on.

TD: In the UK, there is presently more limited scope and appetite for major commercial law firms to work on a fully contingent basis (as compared to the US). As a result, litigation funding can be an attractive proposition for law firms, clients and funders on the right cases and in some cases obtaining funding will be the only practical option available when pursuing a claim.

Q: Is there any niche where you think litigation funding might take off, but it hasn’t yet? For instance, smaller cases that might not require hundreds of thousands of euros (or dollars) in backing.

PC: I am already seeing funders on the scene who are very happy to consider funding smaller disputes in many legal practice areas—for example, contract claims, banking disputes, infrastructure disputes.

TD: As things presently stand, it is difficult to see how third party funding will develop to offer a realistic option for ad hoc smaller claims as in most cases the economics still require a sufficient damages “pot” to ensure that the client makes a meaningful recovery and the funder recovers a meaningful uplift on any investment it has made. However, the funding model may work across a portfolio of claims where law firms are working on many similar types of smaller value matters and a funding model can be applied across the portfolio as a whole rather than in relation to individual cases.

For further reading, check out the original article at The Lawyer, or any of our Plaintiff Resources.

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