UK well ahead of USA in use of litigation finance, survey finds

Bogart: “strong demand driving dramatic growth”

The UK is well ahead of the USA in the litigation finance, a survey of law firms and in-house lawyers has found, with 41% of UK respondents having used, compared to only 32% in the US and 40% in Australia.

UK lawyers and companies were also the most likely to say they had increased their use of litigation finance over the last two years – 70% in the UK, compared to 52% in the USA and 48% in Australia.

A total of 180 lawyers, mainly at larger law firms, together with 151 corporate counsel and finance professionals in the three countries took part in the poll commissioned by Burford Capital.

The company did caution that some of the figures appeared out of kilter with reality, however.

“Some respondents may reflect the well-known research phenomenon of social desirability bias, insofar as they perceive litigation finance as cutting-edge and may therefore have overstated their experience,” it said.

“We offer this caveat given the incongruence between some survey results and external data around capital flows and market size. Nonetheless, we are confident that as a whole, the research provides ample evidence of the ongoing growth and increased relevance of litigation finance to the business of law.”

The most critical business challenges for companies using litigation finance in the UK were managing legal risk and uncertainty, the need to find new ways of financing litigation and other legal costs, and the need for external counsel to show innovation (88%).

Other important reasons were ongoing legal expenses lowering financial results and increased pressure on legal budgets, staff and spending.

For law firms, there were multiple motivations, in particular the pressure to be more competitive in bringing in new business, and increased client pressure on legal budgets, staffing and spending.

The UK had the lowest proportion of respondents saying their organisation had been forced to “forgo claims” because of the impact of legal expenses – only 17%.

The main obstacles to the use of litigation funding identified in the UK were perceived cost, concerns about control of litigation and the time required to obtain litigation finance.

Litigation finance was mainly used in the UK for single-case funding (86%), followed by expense funding (58%). However, use of portfolio funding was significant at 28%, with 16% using finance for judgment enforcement and asset recovery.

In terms of size of investment, the average sought by companies in all three countries was $3.4m, and by law firms $2.8m.

The most important perceived benefits of litigation finance were pursuing claims that brought value to the business, bringing or sustaining proceedings regardless of the organisation’s cash position and preserving capital to pursue other opportunities.

Christopher Bogart, Burford’s CEO, commented: “Burford’s latest research affirms our own experience: More and more often, clients and law firms are turning to litigation finance as a solution to some of the intractable challenges and pressures of managing legal cost and risk, and that strong demand is driving dramatic growth.”

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