2018 Litigation Finance Survey: Latest research shows continued growth

Every year since 2012, Burford Capital has made an investment in studying the degree to which lawyers in in-house legal departments and at law firms know about, understand and use litigation finance. This research—which has evolved into our annual Litigation Finance Survey—has provided valuable insights into the state of the industry at an exciting time of growth.

As the 2018 Litigation Finance Survey reveals, that growth is ongoing—indeed, exploding. Yet there remains a significant and important gap in understanding.

In 2018, it’s hard to find any lawyers who say they’ve never heard of litigation finance. The population of those who say their companies or law firms have never used it is shrinking steadily. And yet, there are clear indications that lawyers at law firms and clients in legal departments aren’t fully leveraging litigation finance—in no small part because of a persistent gap in understanding what it is and therefore what it offers them.

We stand ready to help in-house and law firm lawyers be more ambitious in their use of legal finance.

 

Snapshot of key findings

The findings are based on research conducted through extensive one-on-one interviews with 38 in-house and law firm lawyers in ten countries as well as 495 online surveys with in-house and law firm lawyers in the US, UK and Australia. Following are highlights of key findings. All quotes are drawn from one-on-one interviews; unless otherwise noted all charts are based on online survey results.

The full results of our 2018 Litigation Finance Survey are available here.

 

Growth remains strong

Reported use has risen dramatically, from under 10% in 2012.

Among interviewees, 32% reported that their organizations have used litigation finance; among survey respondents, a stunning and indeed unbelievable 70% reported use by their organization. Although aligned in direction, these responses vary quite obviously in degree. While we and our research partner stand confidently behind the implications of our online survey findings, we note that the nature of the online survey medium allows for this kind of overstatement. We also believe this variation is an example of social desirability bias in action: If lawyers perceive litigation finance as something that innovative companies and law firms should use, they will naturally tend to over-report its use.

 

More growth ahead

The vast majority of those surveyed online (77%) say litigation finance is an increasingly important area in the business of law. Of those who haven’t yet used it, most (70%) expect to use it in the next two years.

 

New business tool for law firms

In interviews, 42% of lawyers described litigation finance as a tool to help law firms be more competitive in winning new business—identified by online respondents as the #1 business challenge firms face.

 

Risk management tool for corporate legal teams

In-house respondents to the online survey cited managing legal risk and uncertainty as their companies’ greatest business challenge (46% identified it as very critical). Over four in ten in-house respondents (42%) see hedging legal risk as a benefit of litigation finance.

Lost value

More than two-thirds of all online respondents (70%) say their organization has chosen to forgo claims due to the impact of associated legal expenses on the bottom line, and 59% report having uncollected recoveries/unenforced judgments valued at over $10 million.

Increased use of litigation finance will drive innovation in the legal market

Interviewees were confident that the presence of litigation finance will impact the market for legal services in positive ways. One general counsel predicted that the growth of litigation finance will lead to more effective fee arrangements: “Anything that makes the legal fee structure more creative and further away from the billable hour is good in my judgment.” An AmLaw 100 law firm partner concurred: “It is probably going to change the way in which litigators will charge for their services; they will provide more options and so we all need to be more innovative.”

Fear of the unknown

Some interviewees spoke of a major obstacle to use of litigation finance as being simply its perceived newness—especially for clients. When asked what concerns their clients have about litigation finance, for example, one law firm lawyer noted: “It is an alien concept. They haven’t heard about their colleagues using it so it is an unknown.” Other law firm interviewees spoke of clients’ “Fear of the unknown, lack of experience, lack of contacts and confusion about the nature of the process” as causing a “knee-jerk reaction.”

 

“You would be very hard pressed to find any sophisticated law firm that does not use litigation financing.”

– Law firm partner


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Disclaimer

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