Although the use of legal finance has increased 105% since 2017 according to the 2020 Legal Finance Report, there remains a significant knowledge gap between companies that have used legal finance and those that have not.
It’s not surprising that use of legal finance leads to understanding and support. Those companies that lack experience with legal finance may fear that it is “harder” than sticking to the status quo—but in 2021, many legal teams can’t afford the status quo. And in fact, legal finance is arguably not only easier to secure and use than those without experience might think—it also has substantial advantages that specifically benefit corporate legal departments.
The most obvious way in which legal finance eases the pressures faced by the legal team is by removing the burden of litigation expense and risk. The majority of Burford’s financing arrangements are non-recourse, meaning that we assume the downside risk for pending litigations, whether through fees and expenses funding (where we cover the cost to pursue a matter) or monetizations (where we advance a portion of an expected award, cash that the company retains regardless of the outcome).
For corporations, funding can be particularly helpful in the context of recovery programs, which are growing in importance given the emphasis on finding value in every corner of the corporation. Affirmative recovery programs at DuPont, The Home Depot, Tyco, Ford and others have generated headlines for over a decade. According to Burford's 2020 Legal Finance Report, 61% of in-house lawyers are likely to pursue affirmative recovery programs in the downturn. Legal finance offers a solution to companies that wish to achieve the value-generation of recovery programs without adding cost. A legal finance provider like Burford is an expert in valuing legal risk, helping legal departments seamlessly transition from cost centers to value generators.
Securing legal finance
The process of securing legal finance is straightforward. It starts with engaging a legal finance provider with institutional-quality processes and the ability to conduct the entirety of the diligence and investment process in-house, as this accelerates the process. The financier will first ask the client to sign an NDA that protects both counterparties.
The timeframe for securing legal finance depends on a variety of factors. Burford has financed thousands of matters over the past 10+ years and laid out simple steps companies can take to prepare.
Although the legal team may be prompted to pursue legal finance because of one high-value claim, they should leverage the expertise of their legal finance partner to gain insight into those meritorious matters most likely to yield the most benefit for the company most quickly. Burford routinely provides companies with strategic plans to prioritize and pursue their valuable meritorious matters—thereby offsetting the legal department’s costs.
Indeed, a particularly efficient way for legal teams is via portfolio-based capital facilities—structures in which matters are gathered in a single funding vehicle. For companies with multiple claims, portfolio-based capital facilities relieve the considerable burdens placed on in-house counsel who must otherwise evaluate competing proposals from law firms or funders for every new case. Further, these portfolios can include both affirmative recoveries as well as defense matters.
Adding value after the initial investment
Burford is a passive capital provider and our financing does not alter the client’s control of litigation or settlement. However, clients may nonetheless benefit from our expertise after an investment is made, as we devote significant resources to monitoring that investment.
We can provide legal teams with additional resources, including monitoring of legal spend and reviewing court documents and briefs. Some of our counterparties prefer the minimum engagement required by our agreements while others actively seek out and benefit from more involved assistance.
The bottom line: Legal finance isn’t hard if you’re working with a partner equipped to relieve companies of administrative challenges by providing expertise in managing litigation budgets and prioritizing legal assets within the corporate portfolio. With our scale, team and track record, Burford has the experience and expertise to help those new to legal finance understand the process and ultimately, reduce the administrative burden of diligence and merit review from companies.