Litigation funding in the UK Grows in Influence

Even as the industry grows and adapts to changing times, some folks still question the staying power of Litigation Finance. It’s here to stay. Third-party legal finance is well-funded, having raised over a billion dollars in 2020. This may be because of its attractiveness to savvy investors seeking opportunities that are not correlated with the market at large.

The Lawyer reports that the sophistication with which funders now choose cases is growing and evolving. Complex algorithms, teams of experts, and other methods of case selection have driven litigation funding forward and gained the attention of hedge funds managers and venture capitalists.

Overseas funders are buying shares of small legal firms, allowing them to take more and larger cases on contingency. Legal professionals are expecting to see more situations like Burford Capital’s recent buyout of Keller Lenkner London’s fund.

Litigation funding as an investment is insulated from the market and can lead to much larger payouts than more traditional investments. At the same time, there is more risk due to the non-recourse nature of the funding contracts. An investor in funded cases may accept a low potential success rate because even if only one in four cases ends in a payout—that award may be so large it covers the rest of the investments that didn’t pay at all.

Mass litigation, AKA class actions, are also becoming more common. Backed by funders hoping for large paydays, the move toward mass litigation is well-funded and likely to keep unscrupulous corporations on their toes.

As this all happens, there are concerns about ‘dirty money’ infiltrating the global economy using London courts as a battleground. Given London’s long reputation for fair adjudication, this is concerning for many in the industry. Legal pros share ongoing concerns over the perception of leniency.