THE FUTURE OF LITIGATION FUNDING
CD: Reflecting on the last couple of years, could you provide an overview of the litigation funding landscape? What do you consider to be the key developments shaping the market?
Barnes: The market continues to grow and become mainstream. Claimants and their lawyers are becoming more familiar with litigation funding, and in turn the demand for funding from those with good claims is increasing. To meet that demand, new capital has found its way into the sector at all levels. There are a number of new entrants looking to fund a higher volume of smaller claims. In the market for higher value claims, the professional regulated funders compete with others that fund on a more ad hoc basis, although it remains to be seen how the well-publicised loss of over £30m in Excalibur will affect the appetite for ad hoc funding. It may be that at least some ad hoc funders will withdraw from the market, alternatively seek to deploy their capital through the professional regulated funders. In any event, the winners will be those who allocate significant capital sums most prudently over the long-term.
CD: What are the potential advantages of litigation funding? Are there any drawbacks that parties might need to consider?
Barnes: Litigation funding facilitates access to justice and for some claimants the main advantage is that they are able to bring a meritorious claim that would otherwise flounder. For those with good claims and financial resources, the attraction is risk management. They can determine, at the outset, exactly how much financial resource they are prepared to put into a claim, in return for sharing a successful outcome. Provided the legal team is also willing to meaningfully share financial risk, another significant advantage is the alignment of the parties’ financial interests. The traditional, hourly rate, billing approach can lead to a misalignment between lawyers and client. By definition, disputes are stressful. Claims evolve and there are up and downs. Funding involves introducing at least one more party into the equation. Get that wrong and, as with any ‘partnership’, cracks start to appear – a potential drawback.
Jan-Mar 2016 issue
Woodsford Litigation Funding