London enters “golden era” of funding options for commercial litigation as money pours in


Whitehead: third-party investment is increasingly attractive

Competition between London-based investors in litigation will bring down prices and loosen up investor criteria, although the outlook for funding smaller cases is bleak, a leading broker has predicted.

Matthew Amey, a director of the insurance and litigation funding broker TheJudge, said London was entering a “golden age for commercial litigation funding options in sizeable cases”.

There were more options for funding in the capital than anywhere else in the world, he estimated. Even Australia, “the birthplace of litigation funding”, does not have such a diverse funding market or such wide-ranging expertise.

He told the Law Society civil justice section conference that competition between third-party funders was “very healthy”, with “more and more funds coming into the market all the time”, although the threshold for funding cases was set quite high.

But “over time, because there is a lot of capital in the market, the investor criteria will come down and there will be more offers being made… and competition will increase such that prices will start to come down. But it will take time.”

The Jackson reforms meant that “for smaller cases the future is more bleak”, Mr Amey added. While historically the legal merits of a case and the probability of being paid at the end have dominated funding calculations, “now it’s all about the ratio between damages to costs” – which in general needs to be at least five to one – and the damages to funding required ratio, and the ratio of risk to reward.

He described the launch of the Association of Litigation Funders as a “real milestone for the market”, whose code of conduct had brought “a lot of credibility” and was “an important kitemark for quality and reliability”.

Fraser Whitehead, practice group leader of Russell Jones and Walker’s group litigation and commercial services department, part of Slater & Gordon, told the conference that third-party investment was increasingly attractive in an era of growing pressures on law firm funding.

But he argued for a spotlight on the social dimension of litigation funding: “It could be a real asset if the focus of at least some investors is on the benefit of delivering access to justice, by which I mean the rights of the majority of people, not just a minority.”

At the same conference, litigation funder Harbour revealed that it is considering using alternative business structures to make funds available to law firms that work under damages-based agreements from next April.

 




Blog

18 October 2018
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